Bank of Canada

US Earnings Continues To Dictate Wall Street Momentum

Bank of CanadaMajor markets trade with mixed momentum on variable cues from international markets. BOC interest rate decision and US Earnings main focus of the day.

Summary: Major equities and benchmark indices in key Asian and European market hours saw mixed price action today. Lack of further updates from Beijing post yesterday’s headlines which hinted at slowdown in their plans for further stimulus on account of strong Q1 financial data caused investors to worry about further progress given the fact that Sino-U.S. trade war is yet to conclude. Dovish cues stemming from uncertainties on Chinese Stimulus caused market to see divided price action despite positive cues from US Wall Street. Investors fear on US government’s decision to stop granting Iranian crude oil import waivers from early week has eased today which combined with prevalent risk on investor sentiment influenced mixed price action in major assets in both Asian and European markets. Forex market is seeing most major pairs trade subdued as US Dollar gained a solid boost on upbeat earnings and better than expected home sales data updates.

Precious Metals: Both gold and silver are trading flat today with slight bearish bias on overnight US greenback’s positive boost. While some of key Asian and European markets saw mixed price action, any chance for gains have been limited on costly dollar in which the precious metals are denominated and prevalent risk on appetite which remains high in the global market.

Crude Oil: Post trading positive for four consecutive trading sessions, crude oil price fell from 2019 highs today as influence from US update to stop Iran sanction waivers eased in the market. Crude oil bears were further supported by build in API weekly crude oil inventory data from US. However, global supply dynamics still remains in favor of bulls capping declines keeping price action week near weekly highs albeit price per barrel falling below $66 handle.

AUD/USD: The Australian Dollar fell more than 1% today as inflation data missed expectations which boosted talks of possibility of rate cut by RBA – Australian central bank. Further, gains in US Dollar influenced by better than expected macro data and Wall Street earnings updates weighed down AUD bulls pushing the pair well below 0.705 handle on path to 0.700 handle. Post the decline in early trading session the pair has maintained range bound price action near intra-day lows across European market hours and this is expected to continue even during US market hours.

On The Lookout: Amid lack of high impact headlines, the market is seeing price action dominated by macro data influenced price activity. While the first half of the week lacked any major updates, the latter half is packed with multiple high impact macro data updates which should keep market bulls and bears on their toes for rest of the week. The main focus today is on interest rate decision update and press conference by Bank of Canada. There is also EIA weekly crude oil inventory data update from US but the same is unlikely to cause any major impact on price action of major risk assets. Key earnings updates to be released today in Wall Street are from Thermo Fisher Scientific, Tesla, PayPal Holdings, Northrop Grumman, Microsoft, Facebook, Caterpillar, Boeing and AT&T. Wall Street is likely to see a highly active market today given the slew of major corporations which see their earnings being release today.

TeslaTrading Perspective: Given the focus on earnings season market is likely to see high volume of short term/intra-day trades. While US Calendar lacks major economic data releases today, it is unlikely to have any visible impact on market.

EUR/USD: The pair continues to see sharp slide in trading session so far this week. Following worse than expected German macro data updates, the common currency fell below 1.1200 mark and is well on its way towards mid-1.11 section. For now immediate downside is capped owing to strong resistance at 1.118 handle, but a breach below said price handle will push the pair to new 2019 lows and continued downward price action in immediate and near future trading sessions.

GBP/USD: The pair fell to 2-month lows earlier today below 1.2900 handle on announcement of 1922 Committee meeting later today. But has since recovered hold above 1.29 mark is on path towards mid-1.29 handle ahead of Wall Street opening. Updates on cross party talks at verge of collapse keeps British Pound pressured on its way upside. Unless major updates are announced, the pair is likely to trade range bound between mid-1.29 handle to mid-1.28 handle respectively.

USD/CAD: The pair is trading with strong positive bias today following overnight surge in US Greenback over upbeat macro data updates and earnings updates. Decline in crude oil price also provided some level of support to USD bulls resulting in the pair seeing sharp upward spike. Investors now await BOC interest rate decision update for short term directional trading cues.