OUTLOOK: What to watch
There have been further positive headlines overnight surrounding reopenings in China, which have helped the Hang Seng in particular, but European and US equity futures remain mixed with Eurodollar, UST and Bund futures all a little lower on the day.
- This morning will see the release of the Minutes of the Riksbank's November meeting, in which rates were raised 75bp. According to our calculations the rate path projections saw a 75% probability of a 25bp hike in February (25% probability of a 50bp hike) with a 10% probability of a further 25bp hike in April before rates remain on hold. However, there will be differing views on the Executive Board about the future path of rates, we think, with some members likely to be tilting more towards a 50bp hike in February than the rate path would suggest. We also note that this was Ingves' last meeting as Governor, and we will have two new Executive Board members at the next meeting in February.
- Elsewhere today the data highlight will be this afternoon's US ISM services print while we will receive the final prints of European, UK and US services PMI, European retail sales data and US factory orders / final print of durable goods.
- The week ahead will see both the RBA and the BoC meet. For the RBA, analysts widely expect a 25bp hike bringing the total tightening for the year to 300bp and the cash rate to 3.1%. This would be around the Board's estimates of neutral. Markets price around 19bp at writing. (For our full RBA preview see here). For the BoC, analysts are split between a 25bp and a 50bp hike with markets pricing around 32bp.
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Historical bullets
USDCAD TECHS: Approaching A Key Support Zone
- RES 4: 1.4016 3.382 proj of the Aug 25 - Sep 7 - 13 price swing
- RES 3: 1.4000 Psychological round number
- RES 2: 1.3855/3977 High Oct 21 / 13 and the bull trigger
- RES 1: 1.3808 High Nov 03
- PRICE: 1.3522 @ 15:52 GMT Nov 4
- SUP 1: 1.3499/96 50-day EMA / Low Oct 27
- SUP 2: 1.3409 Low Sep 22
- SUP 3: 1.3358 Low Sep 21
- SUP 4: 1.3227 Low Sep 20
USDCAD traded sharply lower Friday. Support is seen at 1.3499, the 50-day EMA and 1.3496, the Oct 27 low. These two chart points have been breached on an intraday basis, but highlight a key support zone on the daily chart. A firm break would highlight a short-term bearish threat and likely trigger an extension of the bear cycle that started Oct 13. This would open 1.3409, the Sep 22 low. On the upside, initial firm resistance has been defined at 1.3808, Thursday’s high.
AUDUSD TECHS: Strong Rebound
- RES 4: 0.6682 Low Jul 14 and a recent breakout level
- RES 3: 0.6656 High Sep 23
- RES 2: 0.6600 Round number resistance
- RES 1: 0.6522 High Oct 27 / 4 and a key resistance zone
- PRICE: 0.6438 @ 15:51 GMT Nov 4
- SUP 1: 0.6272 Low Nov 3
- SUP 2: 0.6210/6170 Low Oct 21 / 13 and the bear trigger
- SUP 3: 0.6133 1.382 proj of the Apr 5 - May 12 - Jun 3 price swing
- SUP 4: 0.6099 76.4% retracement of the 2020 - 2021 bull cycle
AUDUSD has found support as the USD weakens across the board. Today’s rally suggests the recent pullback between Oct 27 - Nov 3 is over and a strong NY close today would reinforce this idea. Key short-term resistance is at 0.6522, Oct 27 high and 0.6547, Oct 4 high. A breach of this resistance zone would strengthen the case for bulls. On the downside, a reversal lower and a breach of yesterday’s 0.6272 low, would reinstate a bearish threat.
BOC: Conservative Leader Renews BOC Attacks, Skips Call To Fire Governor
- Pierre Poilievre in Friday speech in Toronto devotes much of one of his first speeches since winning leadership race to inflation, deficits, Bank of Canada
- “The inflation that we have today is a result of deliberate decisions to flood our economy with more money"
- “Now our central bank seems to have woken up to the fact that we have inflation and that it is not transitory, as we were all told, and they are rapidly increasing interest rates. That creates a new crisis,” he said, including “bubbles” in “debt and real estate.”
- Speech at: https://www.cpac.ca/episode?id=d67a8608-b564-4435-97b6-49170b5872cc
