BoC interest rate decision day

The Bank of Canada’s interest rate decision is set to occur during today’s American session. In particular the majority of economists are currently anticipating the bank to remain on hold with CAD OIS currently implying a 72% probability for such a scenario to materialize. Thus attention may turn to the bank’s accompanying statement where market participants may look for some insight into the bank’s possible monetary policy path in the future. Therefore, should the minutes be perceived as hawkish in nature it may aid the Loonie and vice versa. In our view, in spite of the relative easing of the hawkish tariff rhetoric from the US, it still remains a concern as seen by the lack of progress being made with trade talks between the US and China and the recent 50% tariff on steel and aluminium imports into the US. Therefore, we would not be surprised to see the bank opt for a more cautionary tone which may be perceived as relatively hawkish in nature, which in turn may aid the Loonie.In the US the ADP national employment figure May is set to be released today and should it echo the resilient labour market narrative which appeared yesterday with a better than expected JOLTs Job openings figure for April, it could potentially aid the dollar despite the releases being for two separate months.In regards to the ongoing deliberations between the US and China on trade, President Trump has stated on his TruthSocial account that “I like President XI of China, always have, and always will, but he is VERY TOUGH, AND EXTREMELY HARD TO MAKE A DEAL WITH!!!”. The President’s comments showcase the difficulty in the progression of trade talks between the US and China, which may increase market worries about the global economy and could potentially aid gold’s price.

On a technical level XAU/USD appears to be moving in an upwards fashion and supporting our case is the RSI indicator below our chart which currently registers a figure near 60, implying a bullish market sentiment, in addition to the MACD indicator below our chart and the upwards moving trendline. For our bullish outlook to continue we would require a clear break above the 3385 (R1) resistance level with the next possible target for the bulls being the 3500 (R2) resistance ceiling. On the other hand for a sideways bias we would require the pair to remain confined between the 3240 (S1) support level and the 3385 (R1) resistance line. Lastly, for a bearish outlook we would require a clear break below the 3240 (S1) support line with the next possible target for the bears being the 3115 (S2) support level.

EURUSD appears to be moving in an upwards fashion,yet the pair does appear to be facing resistance at our 1.1420 (R1) level. Nonetheless, we opt for a bullish outlook for the pair and supporting our case is the upwards moving trendline which was incepted on the 9th of May. For our bullish outlook to continue we would require a clear break above the 1.1420 (R1) resistance line, with the next possible target for the bulls being 1.1685 (R2) resistance level. On the other hand for a sideways bias we would require the pair to remain confined between the 1.1185 (S1) support level and the 1.1420 (R1) resistance line. Lastly, for a bearish outlook we would require a clear break below the 1.1185 (S1) support line with the next possible target for the bears being the 1.0950 (S2) support level.

Other highlights for the day:

Today we note the release of the Czech Republic’s preliminary CPI rates, Euro Zone’s and the UK’s final composite and services PMI figures and later on we get the US ADP national employment figure and the ISM non-manufacturing PMI figure all being for May. Oil traders may be more interested in the release of the weekly EIA reading, while on a monetary level, besides Canada’s BoC interest rate decision, we also note that Atlanta Fed President Bostic speaks. In tomorrow’s Asian session, we get Japan’s overall labour cash earnings for April, Australia’s April trade data and China’s Caixoin Services PMI figure for May.

XAU/USD Daily Chart

• Support: 3240 (S1), 3115 (S2), 2980 (S3)
• Resistance: 3385 (R1), 3500 (R2), 3645 (R3)

EUR/USD Daily Chart

• Support: 1.1185 (S1), 1.0950 (S2),  1.0740 (S3)
• Resistance: 1.1420 (R1), 1.1685 (R2), 1.1885 (R3)

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