Renewed weakness in oil prices dragged down stock markets again. WTI crude oil lost steam after hitting 32.74 yesterday and is back below 30 for the moment. DJIA ended lower on energy stocks and lost 208.29 pts, or -1.29%, to close at 15885.22. S&P 500 dropped -29.82 pts, or -1.56% to close at 1877.08. At the timing of writing, Nikkei is trading down -2%, HK HSI down -1.6% and China SSE composite down -1.2%. In the currency markets, commodity currencies pared back some of last week’s gain and trading mildly softer today. Recovery in yen crosses also lost momentum following stocks.

ECB president Mario Draghi said emphasized yesterday that “meeting our objective is about credibility”. And, “if a central bank sets an objective, it can’t just move the goalposts when it misses it.” Also, with “inflation already low for some time”, there is a “danger that a continued period of low inflation — even if oil-driven — might destabilize inflation expectations and become persistent.” Last week, Draghi said in the post meeting press conference that the central bank will “review and possibly reconsider” monetary policy at its next meeting in March.

In UK, BoE policy maker Kristin Forbes said that “tightening monetary policy today would require faith that our forecasting models will work and the tightness in labour market quantities and measures of labour market churn will soon translate into stronger wages.” And, “the most recent falls in oil prices, by delaying the recovery in inflation, provide the luxury of a bit more time to build this confidence.”

On the data front, Japan corporate service price index rose 0.4% yoy in December. Swiss will release trade balance in European session. US will release house price indices and consumer confidence.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.4179; (P) 1.4235; (R1) 1.4346; More

A temporary low is formed at 1.4114 in USD/CAD and intraday bias is turned neutral first. The consolidation from 1.4689 short term top is expected to continue for a while and hence recovery would likely be limited by 1.4689 and bring another fall. But still, in case of any downside attempt, USD/CAD should be contained by 1.3815/4000 support zone and bring rebound. Eventual upside breakout is expected for up trend resumption.

In the bigger picture, the up trend from 0.9056 long term bottom is still in progress and remains in acceleration phase. Further rise would be seen to 138.2% projection of 0.9056 to 1.3063 from 0.9406 at 1.4944 next. Break of 1.3456 resistance turned support is needed to be the first sign of medium term topping. Otherwise, outlook will stay bullish in case of pull back.

Economic Indicators Update

GMT Ccy Events Actual Consensus Previous Revised
23:50 JPY Corporate Service Price Y/Y Dec 0.40% 0.20% 0.20%
07:00 CHF Trade Balance (CHF) Dec 3.33B 3.14B
14:00 USD House Price Index M/M Nov 0.40% 0.50%
14:00 USD S&P/Case-Shiller Composite-20 Y/Y Nov 5.70% 5.54%
15:00 USD Consumer Confidence Jan 96.8 96.5
23:30 AUD Westpac Leading Index M/M Dec -0.20%

This article originally appeared at Action Forex.