LOONIE FALLS SHARPLY AFTER A JUDGE HALTS KEYSTONE XL PIPELINE
The greenback rose today after the hawkish statement from the Federal Reserve yesterday. The bank left interest rates unchanged as traders had expected. The statement pointed to another rate hike in December. Previously, investors were divided about whether the bank would hike in December. This is because of the continued criticism of the Fed by Donald Trump, the projected slowdown in the economic growth and the recent volatility in stocks. December’s rate hike will be the fourth one this year.
The Canadian dollar declined today after a judge in Montana halted the Keystone XL pipeline. After becoming president, Donald Trump quickly restarted the project arguing that it would help the country create jobs. The judge ruled that the Trump administration did not complete the Environmental Impact Assessment (EIA) for the project. The halting of the pipeline was major news for Canada. This is because once completed, the pipeline would transport more than 830K barrels of oil every day from Canada to Nebraska.
The sterling fell today after the UK released mixed economic data. In the second quarter, the economy expanded by an annualized rate of 1.5%, which was higher than the second quarter’s 1.2%, and met the consensus estimate of 1.5%. On the negative side, business investment in the second quarter declined by minus 1.2%, which was worse than the 0.2% growth that traders were expecting. This is clear evidence of the uncertainty that has engulfed the business community about Brexit. On a positive side, the construction output rose by an annualized rate of 1.7%, which was better than the consensus estimate of 1.1%. The manufacturing production in September rose by an annualized rate of 0.5%, which was better than the consensus estimate of 0.4%.
The GBP/USD pair declined to an intraday low of 1.2988. This was a continuation of the downward momentum that started on Wednesday when the pair reached a high of 1.3173. On the hourly chart, the pair’s ATR which measures volatility reached the lowest level since yesterday, which is a sign that volatility has eased. The double Exponential Moving Average shows that the pair will accelerate the downward momentum. This is confirmed by the RSI, which is currently at 25. While this could be viewed as an oversold position, when there is no clear support level, it is usually an indicator of the strength of the pair.
The EUR/USD pair declined sharply today, continuing a trend that was started on Wednesday this week. Since then, the pair has lost more than 1.50%. Today, it reached an intraday low of 1.1327. The main reason for the decline is the hawkish Fed and the lowered EU economic projections. The MACD is currently at the lowest level since October while the RSI is at 32. The pair’s price is also along the lower band of the Bollinger Bands indicator. Therefore, the pair’s path of least resistance is downwards. This will likely take it to the 1.1300 level.
At the beginning of October, the USD/CAD pair started an upward trend. Since then, the pair has made higher highs and higher lows, and today it reached an intraday high of 1.3200. This is a gain of more than 3.2%. Today, the pair continued to rise catalyzed by the Federal Reserve and the halting of the Keytone XL pipeline. The momentum indicator shows that the pair could continue the upward trend. This is confirmed by the double EMA, the lack of a solid resistance level and lack of a catalyst on the Canadian side. Therefore, the pair will likely move higher to test the important resistance level of 1.3220 as shown below.