CANADIAN ECONOMY STALLS AFTER EIGHT MONTHS OF GROWTH
The US dollar showed signs of stabilization in the midst of rebounding of stocks and the House's approval of the tax reform bill.
Earlier today, European Central Bank President Mario Draghi presented a glowing report of the Eurozone economy. In his address at the banking conference in Frankfurt, Draghi said that the ECB is not in a hurry to start raising its interest rate. He further stated that economic growth is spreading across all European countries and is "feeding itself”. According to Draghi a rise in employment levels boost investment and private consumption which indirectly increase production in European countries. He further stated that due to weak inflation, ECB support is still needed. He went on to dismiss criticism about the bank's stimulus policy, that it is destroying the stability of the financial sector and also weighing on the bank's profit, by saying that "ECB research finds very little evidence that our monetary policy is currently doing harm as net interest income of banks remains quite stable over the past two years."
Recent data showed that inflation in Canada slowed around 1.4% in October as compared to the previous month. This data is likely to reinforce the Bank of Canada's approach to the interest rate policy. According to Data, Canada's consumer price index increased 1.4% on a year over year basis in October as expected, in September it was 1.6% y-o-y. Gasoline prices in the country rose in the previous month but at a slower pace as compared to the month before that. The Bank of Canada set its interest rate to achieve and maintain 2% inflation rate. BOC raised its interest rate two quarter points in July and September making it 1% saying that it is adopting a cautious approach to setting its interest rate. This was due to the fact that the bank placed greater weight on the downside risk posed by lower inflation.
EUR/USD is expected to trade with a bullish outlook. The pair retracted back from the 1.18212 level (today's high). The relative strength index is also mixed with a bullish bias. The price is trading above its rising 50 day moving average. Even though the price came down below 1.18212, the downside movement will be temporary. So, as long as the price is above 1.17562 (yesterday's low) look for further upside toward 1.18212 and 1.18792 (last month’s high). Alternatively, below 1.17562 look for 1.1700 and 1.1674 (last week’s high).
USD/CAD is trading with a bullish outlook and expected to continue its upside movement. The pair rebounded from 1.2665 (last week's low) and trading around last week's high at 1.2807. The relative strength index is heading upwards, and the 50 day and 20 day moving averages are turning bullish. As long as the price is above 1.27129 look forward for upside targets at 1.2855 and 1.2915 (last month's high). Alternatively, below 1.27129, look for 1.2665 (last week's low) and 1.2620.
GBP/USD is turning down. The pair retracted back from 1.32595 (today's high) and looking to trade in the lower range. The relative strength index is turning bearish below its neutrality area. So as long as the price is below 1.3259 (today's low) look for downside targets at 1.31345 (yesterday's low) and 1.3085. Alternatively, only a break above 1.32595 would call for 1.3305 and 1.3360.