Equities Take a Breather, ECB Decides on Mon. Policy

Equities Correct Lower on US Stimulus Uncertainty

The US dollar traded higher against all but two of the other G10 currencies on Wednesday and during the Asian session Thursday. It gained the most versus NOK, NZD, SEK, and JPY in that order, while it underperformed only against AUD. The greenback was found virtually unchanged against CAD.

DJIA — Technical Outlook

The Dow Jones Industrial Average index continues to trade inside a rising wedge pattern, which has been dragging from around mid-November. After yesterday’s rejection near the upper bound of that formation, the price corrected lower and is now trading below its 21-day EMA. This might be seen as a bearish indication, however, if the boundaries of the wedge remain intact, the bulls could jump back into the game somewhere near the lower side of that pattern.

BoC Stands Pat, ECB Takes its Turn

Yesterday, we also had a BoC interest rate decision. The Bank kept its interest rates and QE purchases unchanged, noting that the rebound in the global and Canadian economies has unfolded largely as the Bank anticipated in its October Monetary Policy Report. Officials acknowledged that the positive vaccine news is providing some reassurance, but added that the pace and breadth of the global rollout of vaccinations remain uncertain. They also said that economic momentum heading into Q4 appears to be stronger than expected in October, but, in recent weeks, the re-imposition of restrictions can be expected to weigh on growth in Q1 2021. In our view, this was a neutral statement, and that’s why the Canadian dollar stayed largely unphased. Moving ahead, we expect the commodity-linked currency to be mainly driven by developments surrounding the broader market sentiment, and especially movements in oil prices.

EUR/AUD — Technical Outlook

Yesterday, it was another big down-day for EUR/AUD as it remained heavily in the red. The technical picture shows that the pair is still trading below its short-term tentative downside resistance line taken from the high of December 7th. Even if the rate climbs a bit higher, if that downside line stays intact, we will class that upmove as a temporary correction, before another possible leg of selling. For now, we will take a somewhat bearish stance.

As for the Rest of Today’s Events

During the early European morning, we already got the UK’s monthly GDP for October, alongside the Industrial and manufacturing production rates for the month. Although the GDP slowed to +0.4% mom from +1.1%, both the IP and MP yoy rates came in better than expected. In any case, the pound barely reacted on the releases, confirming our view that GBP-traders keep their gaze mostly locked on developments surrounding Brexit.

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