Crude oil led rebound in stocks overnight as DJIA closed up 282.01, or 1.78% at 16167.23. S&P 500 rose 26.55 pts, or 1.41% to close at 1903.63. WTI breached 30 handle but quickly recovered and is trading at around 30.80 for the moment. Asian markets open higher with Nikkei trading up 460 pts, or 2.7% at the time of writing while HK HSI is up 250 pts or 1.3%. However, stocks in China have no reactions to the global markets and are trading mildly lower. Another sell-off in Chinese stocks could drag down sentiments again. In the currency markets, commodity currencies are generally higher, in particular Canadian dollar. Sterling also benefits from receding risk aversion and recovers against dollar and yen.
Dollar is mildly lower as markets await FOMC rate decision today. Fed is widely expected to keep interest rate unchanged at 0.50% today. The main question is FOMC’s overall view on recent developments in global financial markets. The turmoil in oil and stocks drastically lowered the chance of a March hike and this is well priced in. Fed fund futures are indicating only around 30% chance of a March hike and around 50% of a June hike. But even a June hike is far from being certain. Thus, attention will be on Fed’s concern over China, oil and the perceived impact on US economy.
Outlook in dollar index remains unchanged for the moment. Recovery from 97.19 is corrective looking and argues upside would be limited below 100.51. Another fall is anticipated and below 98.37 support will bring a test on 97.19 first. Break there will extend the fall from 100.51 as the third leg of the consolidation pattern from 100.39. In that case, the index could target 92.62 low.
Released from Australia CPI rose to 1.7% yoy in Q4, up from Q3’s 1.5% and beat expectation of 1.6% yoy. RBA trimmed mean CPI was unchanged at 2.1% yoy while RBA weighted median CPI slowed to 1.9% yoy. The rate path of RBA remains heavily dependent on developments in China and opinions on whether RBA would cut this year vary. Looking ahead, German Gfk consumer sentiment, UBS consumption indicator, UK BBA mortgage approvals and US new home sales will be released.
USD/CAD Daily Outlook
Daily Pivots: (S1) 1.4000; (P) 1.4162; (R1) 1.4281; More…
The pull back from 1.4689 resumed after brief recovery and intraday bias is back on the downside. Deeper fall could be seen. But after all, price action fro 1.4689 short term top are viewed as a consolidative pattern. Thus, we’d expect downside to be contained by 1.3815/4000 support zone and bring rebound. Above 1.4325 minor resistance will turn bias back to the upside for retesting 1.4689 high.
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
|23:30||AUD||Westpac Leading Index M/M Dec||-0.30%||-0.20%||-0.30%|
|0:30||AUD||CPI Q/Q Q4||0.40%||0.30%||0.50%|
|0:30||AUD||CPI Y/Y Q4||1.70%||1.60%||1.50%|
|0:30||AUD||CPI RBA Trimmed Mean Q/Q Q4||0.60%||0.50%||0.30%|
|0:30||AUD||CPI RBA Trimmed Mean Y/Y Q4||2.10%||2.10%||2.10%|
|0:30||AUD||CPI RBA Weighted Median Q/Q Q4||0.40%||0.30%|
|0:30||AUD||CPI RBA Weighted Median Y/Y Q4||1.90%||2.20%||2.10%|
|7:00||GBP||Nationwide House Prices M/M Jan||0.60%||0.80%|
|7:00||EUR||German GfK Consumer Sentiment Feb||9.3||9.4|
|7:00||CHF||UBS Consumption Indicator Dec||1.66|
|9:30||GBP||BBA Mortgage Approvals Dec||45.5K||45.0K|
|15:00||USD||New Home Sales Dec||505k||490k|
|15:30||USD||Crude Oil Inventories||4.0M|
|19:00||USD||FOMC Rate Decision||0.50%||0.50%|
|20:00||NZD||RBNZ Rate Decision||2.50%||2.50%|
This article originally appeared at Action Forex.