The BOC remains on hold as was widely expected

The Bank of Canada remained on hold, remained on hold as was widely expected. In the bank’s accompanying statement, they stated that “The slowdown in the economy is reducing inflationary pressures in a broadening range of goods and services prices”, which could further imply that the bank is done with interest rates.  As such, the perceived dovish statement by the bank, may have weakened the Loonie.In the US the ADP Non-Farm Payrolls figure, came in lower than expected at 103k, which could further imply a loosening labour market. The lower-than-expected figure could potentially weigh on the dollar, as it may weaken the Fed’s resolve to maintain interest rates at their current levels. Over in Asia, China’s Import rate for November, came in lower than expected at -0.6%, which could spell trouble for Australia’s goods, as China is one of their predominant trading partners. Therefore, a reduction in imports may imply a reduction in demand for Australian goods, which in turn could weigh on the Aussie. In the commodities markets, we note that the US EIA Crude oil inventories figure for December came in lower than expected. The greater drawdown in inventories may imply that there has been in an increase in demand for oil, which may have provided temporarily some support for oil prices. In Europe, the Eurozone’s Revised GDP rates for Q3 are due out later on today, which could weigh on the EUR should the expected rates come in as expected or lower and vice versa.

USD/JPY appears to be moving in a downwards fashion, with the pair having broken below support turned resistance at the 146.30 (R1) resistance level. We maintain a bearish outlook for the pair and supporting our case is the downwards moving trendline which was incepted on the 13^a. of November, in addition to the RSI indicator below our 4-hour chart currently registering a figure of 30, implying a strong bearish market sentiment. For our bearish outlook to continue, we would like to see a clear break below the 144.45 (S1) support level, with the next possible target for the bears being the 143.00 (S2) support level. On the other hand, for a bullish outlook, we would like to see a clear break above the 146.30 (S1) support level, with the next potential target for the bulls being the 148.25 (R2) resistance level. Lastly for a neutral outlook, we would require the pair to remain confined between the aforementioned S1 and R1 levels.

XAU/USD appears to be moving in a sideways fashion, with the pair currently testing the 2035 (R1) resistance level. We maintain a neutral outlook for the precious metal, and supporting our case is the break below the support-turned-resistance level at the 2035 (R1) resistance line. Yet the RSI indicator below our Daily chart, currently reads a figure near 60, implying a relatively bullish sentiment. For our sideways bias to continue, we would like to see the precious metal remain confined between the 2005 (S1) support level and the 2035 (R1) resistance line. On the other hand, for a bullish outlook, we would like to see a clear break above the 2035 (R1) and the 2077 (R2) resistance levels, with the next possible target for the bulls being the all-time high figure of 2136 (R3). Lastly, for a bearish outlook, we would like to see a clear break below the 2005 (S1) support level, with the next possible target for the bears being the 1960 (S2) support base. We would like to note that in comparison to the past few days, the S1 and R1 levels are relatively close to each other.

Other highlights for the day:

Today in the European session, we get Germany’s Industrial production rate for October, followed by the UK’s Halifax house prices rate for November and the Eurozone’s revised GDP rates for Q3. In the American session, we note the US weekly initial jobless claims and Canada’s building permits rate for October. In tomorrow’s Asian session, we highlight Japan’s revised GDP rates for Q3. On a monetary level, we note the speech by ECB board member Elderson and the release of the Fed’s quarterly financial accounts of the US.

USD/JPY H4 Chart

Support: 144.45 (S1), 143.00 (S2), 141.50 (S3)

Resistance: 146.30 (R1), 148.25 (R2), 150.10 (R3)

XAU/USD Daily Chart

Support: 2005 (S1), 1960 (S2), 1910 (S3)

Resistance: 2035 (R1), 2077 (R2), 2136 (R3)

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