Trump’s Comments Weigh Further on Market Sentiment, BoC Decides on Rates

Trump Says US-China Deal May Come After Elections

The dollar traded lower or unchanged against most of the other G10 currencies on Tuesday and during the Asian morning Wednesday. It lost ground against JPY, CHF, GBP and CAD in that order, while it was found virtually unchanged against EUR, NZD and SEK. The greenback underperformed versus AUD and NOK.

USD/JPY — Technical Outlook

Yesterday, USD/JPY took another strong hit, which led to a break of the short-term tentative upside support line drawn from the low of October 3 rd. The pair fell below its 200 EMA on the 4-hour chart, drifted lower and found support near the 108.47 hurdle, which is also the low of November 22 nd. Given the current risk-off environment, we believe there might be more downside to come, at least in the short run.

AUD the Main G10 loser, BoC Takes the Central Bank Torch

The Aussie was the main loser among the G10s, which apart from the trade headlines, also felt the heat of Australia’s below-consensus GDP for Q3. Specifically, the qoq rate came in at +0.4%, below the +0.5% forecast, but the Q2 print was revised up to +0.6% from +0.5%, thereby leaving the yoy rate unchanged at +1.7%. The message we got from yesterday’s RBA meeting is that officials are more comfortable staying sidelined than investors have previously believed, which according to Australia’s OIS (Overnight Index Swaps) prompted participants to push the timing of when they expect another cut to July from April. However, after the disappointing GDP, they brought their expectations forth again, pricing in a rate decrease to be delivered in May. Focus for Aussie traders now shifts to retail sales for October, due out tonight, which are forecast to have accelerated somewhat, to +0.3% mom from +0.2%.

EUR/CAD — Technical Outlook

Overall, EUR/CAD continues to trade inside a wide rising channel pattern, which is taken from the beginning of October. On Monday, the pair exploded to the upside, making its way closer to the upper bound of the channel. This morning we are seeing a bit of retracement, which could be considered as a temporary correction before another leg of buying. For now, we will stay cautiously-bullish.

As for the Rest of Today’s Events

During the European morning, we get Eurozone’s final services and composite PMIs for November, which as it is always the case, they are expected to confirm their preliminary estimates. The UK services and composite indices are also coming out. The services print is anticipated to have slide into contractionary territory, to 48.6 from 50.0, with the composite index expected to move in a similar fashion. Specifically, it is expected to decline to 48.5 from 50.0.

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