EUR/USD: Yellen May Spur Some Profit Taking Today
Growth Aces | Nov 17, 2016 07:48AM ET
EUR/USD: Yellen May Spur Some Profit Taking Today
- Philadelphia Federal Reserve President Patrick Harker said he favored raising interest rates and that the U.S. central bank might have to hike more aggressively if the incoming Trump administration enacts a fiscal stimulus. Harker does not have a vote on monetary policy this year but he will in 2017.
- Cleveland Fed President Loretta Mester said the Federal Reserve must not overreact to market moves following the shock U.S. presidential election in part because it is too early to predict any new tax and spending policies, so the plan remains for gradual interest rate hikes.
- Eurostat confirmed its earlier estimate that inflation last month was 0.5% yoy, up from 0.4% in September and 0.2% in August. The European Central Bank wants to keep inflation below, but close to 2% over the medium terms.
- The dollar fell back against other major currencies on Thursday, hit by speculation U.S. Federal Reserve chief Janet Yellen will express concern over the pace of its surge and an accompanying rise in bond yields. That could spur some profit-taking on the bullish dollar positions.
A rise in U.S. bond yields:
- The dollar has ground its way higher this week after jumping in the days following Donald Trump's victory in the U.S. presidential election last Tuesday, fuelled by expectations a Trump White House would drive up inflation.
- Yellen testifies to the congressional Joint Economic Committee from 15:00 GMT.
- We are looking to take advantage of near-term recovery attempts. Immediate decent resistance comes in at 1.0816, Tuesday’s session high. We have raised our sell order to 1.0865, 14-day ema.
USD/CAD: Canada Need Not Move In Line With Fed
- Deputy Governor of the Bank of Canada Timothy Lane speculated about the impact on Canada of a hypothetical Fed rate hike, saying there would be a tightening effect via higher market interest rates and a stimulative effect as a weaker Canadian dollar boosts export competitiveness. He added: “We are free to adjust our policy interest rates in the context of Canadian economic conditions - and, in particular, do not need to move in step with the Federal Reserve.”
- In an apparent reference to the U.S. election of Donald Trump, Lane noted that market rates and capital flows have shifted sharply over the past week, "along with changing perceptions of the direction of the economic policies of the United States."
- The 0.3% September increase in Canadian manufacturing sales topped market expectations for a gain of 0.1%, but a dip in volumes suggested slower overall economic growth heading into the fourth quarter.
- Let’s take a look at oil, which is one of Canada's major exports. Oil prices steadied on Thursday as expectations of an OPEC deal to limit production were balanced by growing evidence of heavy oversupply and rising stocks, particularly in the United States. U.S. crude inventories rose by 5.3 million barrels in the week to November 11, well above forecasts of an increase of 1.5 million barrels, data from the U.S. Energy Information Administration showed on Wednesday. OPEC countries are due to meet on November 30 to discuss limits on production, and may even agree a cut in output in an attempt to push up prices, but data shows global supply continues to increase. Russia has expressed willingness to support an OPEC decision to freeze oil output, Russian Energy Minister Alexander Novak said, adding he might meet Saudi Arabia's Energy Minister Khalid al-Falih at a conference in Doha this week
- The Canadian dollar strengthened against its U.S. counterpart. Long-term charts remain bullish though. We stay sideways on this pair as in our opinion no position is justified from risk/reward perspective.
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Source: GrowthAces.com - Daily Forex Trading Strategies
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