BANK OF CANADA TIGHTENS MONETARY POLICY
The main market moving event today came from the Bank of Canada increasing interest rates a quarter percent to 1.00%. This is the second hike for 2017 when BoC increased the rate in July for the first time in seven years. This led to the sharp appreciation of the Canadian dollar which hit two year highs and we may see further growth of the loonie over the next few days.
The EUR/USD rolled back but keeps moving within the local rising trend. Investors are waiting for tomorrow’s speech by ECB President Mario Draghi where he may give some clues about future plans of the central bank concerning the timing for the reduction of the asset purchasing program in the Eurozone. Some experts predict that the volume of purchases will be 40 billion euro versus the current 60 billion euro. At the same time, the US dollar remains under geopolitical pressure caused by nuclear and missile tests in North Korea. Some pressure on the pair’s quotes today came from news on the decline of the Eurozone’s retail PMI to 50.8 in August compared to 51.0 in July. However, the USD also took a hit from the Markit Services PMI which reduced by 0.9 in August to 56.0.
The Australian dollar recently demonstrated a sharp rising impulse, but most of the trading session has been under pressure by the bears. Economic growth in Australia was 0.8% for the second quarter which was in line with forecasts and much better than in the first quarter where the indicator increased by just 0.3%. Volatility levels for the aussie are likely to remain high due to the expected publication of macro statistics on retail sales and trade balance in the country tomorrow at 01:30 GMT.
The common currency keeps growing within the rising trend and after the recent descending correction to 1.1930 may resume positive dynamics and reach the psychologically important 1.2000 mark. In order to switch to a negative trend, the quotes need to break through the support at 1.1825. Volatility is likely to rise tomorrow after Mario Draghi’s speech.
The price of AUD/USD was not able to gain a foothold above the important resistance level at 0.8000 and corrected downwards. Within the descending impulse the immediate objective may be the support at 0.7870. We do not exclude the scenario in which bulls will push the price above 0.8000 and in this case the targets will be at 0.8200 and above.
After a long consolidation above the support at 1.2365 the USD/CAD price was able to break through it. The trigger came from the increase to the benchmark interest rate by the Bank of Canada to 1.00%. Within the current impulse, quotes may extend the movement to 1.2000. The RSI on the 15-minute chart points to a possible upward correction.