CADJPY, H4
The S&P/TSX composite index (benchmark Canadian index) continued to decline to a two-week low of 21,421 yesterday, led by technology and mining stocks. Meanwhile, Powell’s return as Fed chairman for a second term helped support financial stocks.
The market’s expectations that the BoC might raise interest rates sooner than expected have diminished, with BoC officials saying there is a lot of uncertainty during the economic downturn and that there won’t be a rate hike until the stagnant economy fades. However, at its October meeting, the BoC announced the end of its QE program, which was followed by reports of October inflation that continued to rise as expected, at 4.7% annually from 4.4% the previous month, the highest inflation rate since February 2003.
On the Japanese side, Yields on 10-year government bonds fell this week after the government announced plans to boost spending of $490 billion that could be followed by issuing more bonds. As a result, the 10-year yield is now 0.075%, down from the 0.09% high seen last week.
From a technical point of view, the CADJPY pair is still stuck in the bearish range that has been going on since the end of October, and the short-term bias continues to point to a downtrend. The price remains below the MA50 and MA200 lines (which have now crossed). The MACD crossed the signal line but remains below the 0 line, while the RSI is still testing the 50 level. The key support is now in the round numbers; if it breaks down below 90.00 the downtrend will continue. Conversely, if the price is able to rise above the MA50 (yellow line), there will be a next target at 91.50.
The pair’s decline is in line with the falling trend in oil prices. That has begun to be affected by plans to increase supply in the markets of superpowers such as the United States, China and Japan, as well as the new Covid-19 outbreak and introduction of new lockdown measures in European countries. Economic data for today are the BoC Financial System Review and Japan PPI, and the CPI Inflation Report is due tomorrow.
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Chayut Vachirathanakit
Market Analyst – HF Educational Office – Thailand
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