BoC’s interest rate decision in focus

During today’s American session, the highlight will most likely be the BoC interest rate decision, with the bank expected to remain on hold, it may weaken the Loonie. Yesterday’s building permits figure for April came in at a whopping -18.8% compared to the expected figure of -2.9%. Furthermore, this seems to have been supported by Canada’s Manufacturing PMI figures yesterday, where despite the sector expanding as a whole, it did so at a slower rate than previously expected. This could potentially place a further burden on the bank today, yet market analysts are split on whether or not the bank will hike or remain on hold. In today’s early Asian session, we note that despite China’s trade balance worsening, it appears that their exports declined significantly to -7.5% on a yoy basis, yet Aussie traders seem to have found a silver lining, with China’s imports improving from their previous rate of -7.9% to -4.5%.China’s much better than expected imports rate seems to have mitigated the potential from Australia’s GDP rate that may have been expected to weaken the currency. During the European session today, we note that Germany’s industrial production improving on a mom basis, yet coming in lower than expectations may not slightly weaken the common currency despite the improvement. In tomorrow’s Asian session, Yen traders may be keeping an eye out for Japan’s GDP rate for Q1, following statements by BOJ Governor Ueda that “when achievement of price target is foreseen, we will discuss specifics of an exit policy and disclose information as needed.”. The statements by the BOJ Governor, could potentially be perceived as indication of a gradual shift in the BOJ’s ultra loose monetary policy at a faster pace that what was previously anticipated.

AUD/USD continued its upwards trajectory since yesterday, breaking above the 0.6665 (S1) resistance turned support line. We maintain our bullish outlook for the pair , as long as the pair remains above the upwards moving trendline and supporting our case is the RSI indicator which is running along the figure of 70, implying a strong bullish sentiment in the market. For our bullish outlook to continue, we would like to see a clear break above the 0.6730 (R1) resistance line, with the next potential target for the bulls being the 0.6815 (R2) resistance ceiling. On the other hand, for a bearish outlook, we would like to see a clear break below the 0.6665 (S1) support level which would coincide with a break below the upwards trendline, in addition to a clear break below the 0.6595 (S2) support level.

USD/JPY continues moving in a slightly downwards trajectory and is currently testing support turned resistance at 139.40 (R1). We maintain a bearish outlook for the pair, as long as the price action continues to validate our downwards moving trendline and supporting our case is the RSI figure below our chart which failed to break above the figure of 50 and is now moving towards the 30 figure, implying a bearish market sentiment. For our bearish outlook to continue, we would like to see a clear break below the 138.20 (S1) support level, with the next possible target for the bears being the 136.80 (S2) support base. On the other hand, for a bullish outlook we would like to see a clear break above the 139.40 (R1) resistance level, with a break above the downwards trendline and a move towards the 141.00 (R2) resistance ceiling.

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In today’s European session, we note the release of Germany’s industrial output for April, UK’s Halifax House Prices for May and on the monetary front we note that ECB’s Vice President De Guindos and ECB board member Bollo are scheduled to speak. In the American session, we note for CAD traders besides BoC’s interest decision also Canada’s trade data for April, while oil traders may be more interested in the release of the EIA weekly crude oil inventories figure. During tomorrow’s Asian session, we note the release of Japan’s GDP rate for Q1 and Australia’s Trade data for April.