ECB on the Spotlight, USDCAD Breaks Higher

Asian indices finished mostly lower today following a downbeat session in Wall Street. With trade negotiations frontier quiet, traders will turn their attention to Europe and focus on the monthly decision on interest rates by the European Central Bank and data on quarterly economic growth. Stock traders will also be following news that Chinese tech company Huawei has filed a lawsuit against the US government over the ban that restricts Fed agencies from using its products.

In Japan, the Nikkei225 index lost 0.65 percent to 21,456, and the Hang Seng benchmark in Hong Kong lost 0.89 percent at 28,779. The Shanghai Composite rising 0.14 percent at 3,106, while The Aussie indices edged higher on Thursday, recording gains for the sixth time in seven days and touched a six-month high. The ASX200 has gained by around 15 percent from mid-December 2018, however, the index is approaching 6300 points which is a level the market has had trouble breaking through convincingly in recent years.

European stocks started the session soft with DAX losing 0.32 percent to 11,550, CAC40 giving up 0.14 percent to 5,281 while in London the FTSE100 index is down 0.40 percent to 7,167.  Geopolitics continues to dominate sentiment with Brexit debate in Europe pointing to the possibility of another heavy defeat for Prime Minster May.

In commodities markets, the Crude oil added 15 cents to $ $56.37/barrel while Brent oil pushed 29 cents higher to $66.25/barrel. US crude oil production remains at a record high 12.1 million barrels per day, while net crude oil imports reached a 4-week high. Although global markets had a volatile day, Gold stayed in relatively tight trading ranges, the price attempted a minor rebound near $1290 level amid subdued Treasury yields but rejected and currently the precious metal is trading at $1286.49. The precious metal price may find support at $1279 ahead of testing 100-day simple moving average down to $1265. Treasury yields moved lower in the US with the 10-year yield at 2.71%. In Europe, Bond yields have moved lower to 15bps at the 10-year point.

On the Lookout: The Organisation for Economic Co-operation and Development (OECD) has recently announced that it cut its 2019 global growth forecast to 3.3% from 3.5% and said that factors such as trade war, policy uncertainty, and weakening confidence would weigh on global growth. The Bank of Canada (BoC) left the policy rate on hold at 1.75%. ECB meeting and Mario Draghi’s press conference will be the main risk event today, but up until then, I would expect EURUSD to trade cautiously around the 1.1300.

The Reserve Bank of Australia at Tuesday’s March board meeting, left the official cash rate unchanged for the 31st month in a row, as was expected, at a record low level of 1.5% but noticed that the economic growth might have slowed in the second half of 2018.

Trading Perspective: In forex markets, US Dollar index is giving up two pips and now is trading at 96.86, the NZDUSD is gaining some momentum and trades higher at 0.6780 with the high in Asian session at 0.6791.

USDJPY trading in just 20 pips range between 111.57 and 111.78 with traders undecided for the next move. The pair is facing the 112 tough barrier ahead, and only a convincing break above can start a new bullish trend. Strong support stands at the 100 and 200-day moving average at 111.30 where demand will be strong.

In JPY futures markets the open interest rose for the second session in a row on Wednesday, this time by around 1.3K contracts vs. Tuesday’s figures. Volume followed suit, up by more than 4.5K contracts after three consecutive daily declines.

GBPUSD: A Reuters poll of FX strategists, shows that the sterling could drop around 9% against USD to test the 1.2000 level should the UK leave the EU without a deal. A separate Reuters poll of economists on Wednesday showed the chance of a no-deal Brexit had fallen to 15 percent, but if the two sides do part ways without agreement, one forecaster predicted sterling could sink as low as parity to the dollar.

GBPUSD Hourly (H1) Chart

The pair yesterday managed to break above the 50-hour moving average giving a breath for the bulls. Pound now is targeting the next resistance at the 100-hour moving average at 1.3182.  Strong support for the pair waits at 200-day moving average at 1.2996.

Open interest in Pound futures markets shrunk by just 895 contracts from the previous day, at the same time recording the fifth consecutive daily drop. In the same line, volume reverted Tuesday’s build and contracted by around 48.7K contracts.

EURUSD: European Central Bank (ECB) is expected to keep rates unchanged today and cut the growth outlook to warrant new loans – long-term refinancing operations. The latest ECB staff projections are very likely to show a downward revision of 2019 GDP growth from 1.7 percent in the December projections. Further, the inflation forecasts are likely to be largely unchanged at 1.6 percent, 1.7 percent and 1.8 percent for the period 2019-2021.

A quiet session for the pair will be today until ECB’s decision and press conference. In Euro futures markets, traders trimmed their open interest positions by around 1.6K contracts on Wednesday from Tuesday’s final 541,753 contracts. In the same line, volume reverted two consecutive daily builds and shrunk by around 10.5K contracts yesterday.

USDCAD: The Loonie dropped to 1.3446 against USD following the BoC which downgraded their global and domestic growth outlooks, dropping a pledge to lift rates to neutral, saying that “the outlook warrants policy interest rate that is below its neutral range.” The pair has entered a bullish trend, and an attempt to November highs at 1.36 looks possible.

USDCAD Daily Chart