Bond Yields Pull Back, BoC Decides on Mon. Policy

Equities Rebound as Treasury Yields Retreat

The US dollar traded lower against all but one of the other G10 currencies on Tuesday and during the Asian session Wednesday. It lost the most ground versus CHF, SEK and JPY, while it gained some ground only versus CAD.

Nasdaq 100 — Technical Outlook

Yesterday, Nasdaq 100 managed to recover all the losses made on Monday, but still this was not enough for the index to get back what was lost during last week. The index continues to trade below a short-term downside resistance line taken from the high of February 16th. As long as that downside line remains intact, there is a good chance that we are not done with the downside moves. That said, to get a bit more comfortable with that idea, we would prefer to wait for a push below the 12719 hurdle first. Until then, we will stay cautiously bearish with the near-term outlook.

Will the BoC Sound More Dovish?

Apart from the US CPIs and any movements in bond yields, market participants may also pay attention to the BoC monetary policy decision. At its prior meeting, the BoC decided to keep interest rates and the pace of its QE purchases unchanged, disappointing those expecting a small cut or even a re-increase in QE. Officials also noted that “As the Governing Council gains confidence in the strength of the recovery, the pace of net purchases of Government of Canada bonds will be adjusted as required”, which suggests that the next policy step for the BoC may be tapering QE.

AUD/CAD — Technical Outlook

Although yesterday we saw AUD/CAD retracing up a bit, the pair remains below a short-term downside resistance line drawn from the high of February 25th. If that line continues to provide strong resistance, another move lower might be possible. But to get a bit more excited with that scenario, a drop below 0.9723 hurdle would be required. Hence our cautiously-bearish approach for now.

As for the Rest of Today’s Events

Apart from the US CPIs and the BoC monetary policy decision, we have the EIA (Energy Information Administration) report on crude oil inventories for last week. Expectations are for a 0.816mn barrels inventory build, after the 21.563mn surge the week before. That said, bearing in mind that the API (American Petroleum Institute) reported a 12.792mn barrels build, we would consider the risks to the EIA print as tilted to the upside. A positive surprise may allow oil prices to continue correcting lower for a while more.

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