Markets Switch to ‘Risk Off’, BoC Decides on Policy

Sentiment Gets Hit Due to Trade Doubts and Yield Curve Inversion

The dollar rebounded and outperformed all but one of the other G10 currencies on Tuesday. The only currency that managed to resist the dollar’s strength, and actually gained somewhat against it, was the safe-haven yen. The biggest losers were the commodity-linked currencies AUD, CAD and NZD, with the former getting a strong hit overnight due to Australia’s worse-than-expected GDP data for Q3.

AUD/JPY — Technical Outlook

AUD/JPY tumbled yesterday, falling below the upside support line drawn from the low of the 26thof October. However, the slide was stopped by the crossroads of the 82.30 level and the prior downside resistance line taken from the peak of the 8thof November. Despite the dip below the upside line, the fact that the rate is still above the aforementioned downside resistance line make us adopt a neutral stance for now.

Pound Stays Brexit Driven, BoC Decides on Policy

The British pound ended the day on the back foot against the dollar, but for sterling traders, that wasn’t a one-way ride. Initially, the currency strengthened on easing concerns over a disorderly UK-EU divorce after a senior EU legal advisor said that the UK could change its mind over Brexit without the saying of other EU member states. However, the rally was stopped after Theresa May’s spokesman said that the government is not going to revoke its notice, with the pound taking the down road. The slide accelerated after May lost a vote on contempt of parliament for not releasing the full legal advice on Brexit, but the pound rebounded again somewhat following another vote which gives more power to Parliament if the vote on the 11thof December fails.

GBP/CAD — Technical Outlook

GBP/CAD traded in a rollercoaster manner yesterday, and during the early European morning today, it is trading slightly below the 1.6890 resistance zone. Monday’s tumble and yesterday’s early rebound confirmed a lower low on the 4-hour chart, which, combined with the fact that the pair continues to trade below the downside line drawn from the high of the 14thof November, suggests that the near-term outlook is cautiously negative.

As for the Rest of Today’s Events

During the European day, we get the final service-sector and composite PMIs for November from the European nations of which we get the manufacturing prints on Monday, as well as for the Eurozone as a whole. As usual, expectations are for a confirmation of the preliminary numbers. Eurozone’s retail sales for October are also coming out and are expected to have risen +0.2% mom after stagnating in September.

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