Market Sentiment Softens, BoC Decides on Mon. Policy

Investors Turn Cautious Ahead of Tomorrow’s ECB Meeting

The US dollar traded higher against all the other major currencies on Tuesday and during the Asian session Wednesday. It gained the most versus CAD, CHF, and AUD in that order, while it eked out the least gains versus EUR, and NZD.

EUR/JPY — Technical Outlook

EUR/JPY has been slowly grinding higher since Monday, staying above the upside support line drawn from the low of August 20th. As long as the rate continues to trade above that line, we will maintain a positive stance.

Will the BoC Hint a Tapering Delay?

As for today, ahead of the ECB, another central bank is scheduled to decide on monetary policy, and this is the BoC. Last time, Canadian policymakers appeared less hawkish than expected, saying that they continue to see the output gap closing in H2 2022, which suggests that their expectations over when they may start raising interest rates have not come forth. What’s more, both the headline and core Canadian inflation rates for July declined, the employment report for the month fell short of its own forecasts, and GDP data for Q2 revealed a contraction. All this added credence to the Bank’s view and raises questions as to whether officials will appear more dovish today.

NZD/CAD — Technical Outlook

NZD/CAD edged north after hitting the upside support line drawn from the low of August 23rd, and then, it emerged above the 0.8970 zone, thereby confirming a forthcoming higher high. In our view, this paints a positive picture, at least with regards to the near-term outlook.

As for the Rest of Today’s Events

The only major data point on the economic agenda is the API (American Petroleum Institute) report on crude oil inventories for last week, but as it is always the case, no forecast is available.

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