The Canadian dollar went weaker against other major currencies after the rate decision announcement made by the Bank of Canada.

What You Need to Know

The Canadian dollar went weaker against other major currencies after the rate decision announcement made by the Bank of Canada. Although a hike of 25 bps is in line with the market expectation, Canada has decided to pause its rate hike cycle after examining the effectiveness of the previous aggressive rate hike program. Meanwhile, the dollar continues to trade in a bearish manner as an upcoming 25 bps rate hike is almost certain by the Fed. Commodities like gold and oil have taken advantage of the weakening dollar to edge higher. Investors may gauge the U.S. GDP data and initial jobless claims, which will be released later today for understanding the U.S. economic condition. 

Look Out For

Current rate hike bets on 1st February Fed interest rate decision: 

25 bps (98.6%) VS 50 bps (1.4%)  

Market Overview

Economic Calendar

Market Movements

DXY

The dollar index slipped 0.39% to 101.641 on Wednesday ahead of the rate hikes decision next week. Trading ranges of the dollar index remain narrow as traders widely expect the Fed to increase rates by 25 basis points next Wednesday. Moreover, the trading condition remained sluggish due to the lack of any big U.S. economic data releases yesterday. Investors are advised to focus on fourth-quarter gross domestic product estimates on Thursday for more trading signals. It could be potential data to trigger the market this week. Expectations of less aggressive rate hikes from the Federal Reserve increased investors’ risk appetite. Therefore, risky assets are more favourable, especially in China and Hong Kong stock markets. 

Along with a narrow range of trading conditions, MACD has illustrated a weak momentum. While RSI is trading at 38, it indicates a bearish momentum ahead. 

Resistance level: 103.44, 105.69

Support level: 101.18, 97.70

XAU/USD

The safe-haven gold rose by 1.17% to $1947 against the weakened dollar at the time of writing. The price has recorded a new high since April 2022. The gold market still holds a very strong sentiment as the market participants expect the Fed to implement the dovish policy by increasing 25 basis points next Wednesday. As inflation data continues to decline, indicates that there will be less need for the Fed to raise the interest rate, and market participants are focused on the idea of ending the Fed interest rate cycle. 

Gold prices are continuing their upward movement to a nine-month high. Meanwhile, MACD has illustrated bullish momentum ahead. , while RSI is at 64, suggesting the trend remains bullish momentum ahead. Investors suggest looking forward to the next resistance level of $1960.

Resistance level: 1960, 1998

Support level: 1917, 1870

EUR/USD 

The Euro has been bullish and testing the resistance level against the dollar. With relatively gloomy economic data in the U.S., the market perceived a high chance the Fed would increase the interest rate by 25 bps, which brings the dollar to trade at its 7-month low. Besides, officials from the ECB have been giving a hawkish tone in their latest comments which bolster the Euro to trade higher. Christine Lagarde, the Chair of ECB will be speaking tomorrow; investors may listen closely to her speech to gauge for the Euro future movement. 

EUR/USD is trading higher following the prior breakout above the previous resistance level at 1.1140. RSI is constantly flowing above 50, suggesting a bullish bias for the pair. The MACD stayed flat lately above the zero line depicting that the bullish momentum for the pair has slowed down. 

Resistance level: 1.1048, 1.1238

Support level: 1.0915, 1.0615

BTC/USD

BTC has been bullish and fends off the worry from the collapse of FTX as it traded above the pre-crisis level. BTC has also taken advantage of the weakening dollar and optimism of China opening its economy and potentially stimulating economic growth in the region. However, the relatively gloomy economic data has hindered the BTC prices from advancing higher. A drop in trading volume for the assets reflects that investors are uncertain over the market condition ahead.

BTCUSD is trading sideways in a more extensive price range after a surge of some 30% in the last two weeks. MACD has illustrated diminishing bullish momentum, while RSI is sliding from the overbought zone of 70 to 51, indicating a diminishing bullish momentum as well. If BTC is able to hold above $22500 level, is it still a bullish bias for BTC.

Resistance level: 23765, 24878

Support level: 22529, 21767

DOW JONES

The Dow traded flat yesterday as investors continued to digest mixed quarterly results ahead of key economic data due Thursday. Microsoft Corporation rebounded following its quarterly results, beating analysts’ estimates, as the surprising strength in its cloud business continued to support its financial situation. On the other hand, the semiconductor sectors are in bearish momentum after the major chipmaker (Texas Instrument Incorporated) earnings fell short of analysts’ estimation. Nonetheless, in the face of uncertainties regarding the monetary policy decision from global central banks, investors are advised to keep an eye out for further crucial US economic data, such as US fourth-quarter GDP data due on Thursday.

The Dow is trading higher following the prior rebound from the support level. MACD has illustrated diminishing bearish momentum, while RSI is at 54, suggesting the index might extend its gains as the RSI stays above the midline. 

Resistance level: 34390.00, 35640.00

Support level: 32730.00, 31370.00

GBP/USD 

The pound rose by 0.75% to $1.2410 against the weakened dollar on Wednesday as investors still expect a half-point hike to 4% from the BoE next month. And they also expect the rate to peaking around 4.5 % this year. The signs of a downturn in inflation are also reverberating through traders’ outlook for the future BoE monetary policy. However, the inflation rate of 10.5% in December was more than five times the 2% target set by the BoE, and investors are advised to keep an eye on the BoE rate hike decision next week. 

The pound is still spiking up to the previous high at $1.2410. MACD is showing an increasing bullish momentum. While RSI is trading at 60, it indicates a bullish momentum ahead. 

Resistance level:1.2662, 1.3196

Support level: 1.2302, 1.1784

USDCAD

The Canada Dollar slumped as the rate hike decisions from the Bank of Canada (BoC) were below the average of its peers as a comparison. As expected, the Bank of Canada increased its target interest rate slightly by 25 basis points to 4.50%. Meanwhile, the Monetary Policy Committee (MPC) vowed to continue its tightening monetary policy to combat inflation spiking. The bank predicted the global economy would slow down from the previous estimation of 3.50% to 2.0% in 2023, citing that Russia’s war on Ukraine remains a significant source of uncertainties.  

USDCAD is trading lower while currently testing the support level. MACD has illustrated diminishing bearish momentum, while RSI is at 45, suggesting the pair might extend its losses after it successfully breakout as the RSI stays below the midline. 

Resistance level: 1.3670, 1.3890

Support level: 1.3345, 1.3050

CL OIL

Oil prices rebounded following the US crude inventories indicating a smaller-than-anticipated increment. According to the US Energy Information Administration (EIA), the country’s commercial crude oil inventories increased by 0.5 million barrels during the week ending 20th Jan, which is lower than the market expectations of 2.4 million barrels. Nonetheless, the gains experienced by the oil market are still capped by fears of a global recession. Although China had eased its Covid-19 restrictions earlier this month, several weakening economic indicators, particularly the US and Europe, have dialled down market optimism over the oil market. US Manufacturing activity continued to shrink in January for the seventh straight month, dragging down the appeal for this black commodity

Oil prices are trading lower following the prior retracement from the resistance level. MACD has illustrated diminishing bearish momentum, while RSI is near 50, suggesting that the commodity would wander in a range from 77.10 to 81.55.

Resistance level: 81.55, 86.15

Support level: 77.10, 73.25