Canada’s October CPI rates in sight

The USD continued to edge lower against its counterparts yesterday as greenback bulls seem to still be on a break. The market seems to remain preoccupied with the Fed’s interest rate cutting path and any signals for more rate cuts to come at a faster pace could further weigh on the US Dollar. On a fundamental level, we also note that Trump seems to be puzzled about picking the next US Treasury Secretary with the list of names possibly widening. The possible pick given the names nominated for other posts could potentially prove to be market-moving, especially should it take the market by surprise. US stock markets sent out mixed signals yesterday, while the market is focusing on the release of Walmart’s earnings report later today. The release gains on attention given also the release of the US October retail sales on Friday. Furthermore, we note that USD’s weakening, enabled gold bulls to take charge of the precious metal’s price direction. 

On a technical level, gold’s price rose yesterday and in today’s Asian session, clearly breaking the 2600 (S1) resistance line, now turned to support. Given that the price action in its upward movement broke the downward trendline guiding the precious metal’s price since the 31^a. of October, we switch our bearish outlook, in favour of a sideways motion bias initially. Please note that the RSI indicator has corrected higher aiming for the reading of 50, implying that the bearish market sentiment has eased. For a bullish outlook we would require gold’s price to break the 2685 (R1) resistance line, thus paving the way for the 2790 (R2) resistance level. Should the bears renew their dominance over gold’s direction, we may see the precious metal’s price falling and clearly breaking the 2600 (S1) support line, forming a lower trough than the one formed on the 14^a. of the month, aiming for the 2475 (S2) support level.  

The main event of the day is expected to be north of the US border, specifically the release of Canada’s CPI rates for October. The headline rate is expected to accelerate to 1.9% yoy if compared to September’s 1.6% yoy. Should the acceleration materialise and be accompanied by a possible acceleration also of the core rate, we may see the Loonie getting some support as the dovishness of BoC policymakers may ease.

USD/CAD edged lower yesterday after hitting a ceiling at the 1.4110 (R1) resistance line. Yet we tend to maintain our bullish outlook for the pair’s price action, as long as the upward trendline guiding it remains intact. Also the price action corrected lower after breaking the upper Bollinger band and the RSI indicator reached the reading of 70, both implying that the pair may have been in overbought levels. Should the bulls remain in the driver’s seat for the pair, we may see it breaking the 1.4110 (R1) line, reaching new four year high levels and we set as the next possible target for the bulls the 1.4270 (R2) resistance base. For the yesterday’s correction lower to be transformed to a full blown-out bearish outlook, we require the pair’s price action to break the prementioned upward trendline in a first signal that the upward movement has been interrupted, break the 1.3960 (S1) support line and continue lower aiming for the 1.3820 (S2) level.   

In tomorrow’s Asian session, we note the release from China of PBoC’s interest rate decision. The bank is to make a policy decision for the 1-year and 5-year prime rates. We expect the bank to remain on hold, maintaining a wait-and-see position given the substantial rate cut delivered in October. For the time being the bank’s monetary policy easing and the Chinese government’s fiscal stimulus do not seem to have had the material impact hoped for. Hence, should the bank also imply that more easing may be on the way, we may see the release weighing on the CNH and possibly supporting the AUD.

Other highlights for the day:

Today, we note the release of Eurozone’s final HICP Rate for October, New Zealand’s biweekly milk auctions figures, October’s US numbers of House Starts and Building Permits and for oil traders API’s weekly crude oil inventories figure. During tomorrow’s Asian session, we get Japan’s October trade data. 

XAU/USD Daily Chart

• Support: 2600 (S1), 2475 (S2), 2350 (S3)
• Resistance: 2685 (R1), 2790 (R2), 2900 (R3)

USD/CAD Daily Chart

• Support: 1.3960 (S1), 1.3820 (S2), 1.3620 (S3)
• Resistance: 1.4110 (R1), 1.4270 (R2), 1.4480 (R3)

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