US CPI rates and Fed’s minutes in the epicenter

The USD index edged lower yesterday as the market sentiment tended to improve yet US stock markets ended another day of mixed signals as the earnings season is about to begin. On the monetary front we also got some mixed signals as on the one hand Chicago Fed President Goolsbee advised prudence and patience regarding rate hikes, which may have implied that a pause in the rate hike path of the Fed is advisable while on the other hand, Minneapolis Fed President Kashkari and Philadelphia Fed President Harker seemed to maintain their hawkishness. The release of the Fed’s March meeting minutes is to provide further insight into the Fed’s intentions and should the document show a hawkish predisposition from the majority of policymakers we may see the USD getting some support. Attention though is expected to be on the release of the US CPI rates for March and should the rates slow down as expected or even more, we may see the USD weakening as the release may ease the Fed’s hawkishness and vice versa as should the rates show that inflationary pressures in the US economy are persistent, a stronger response from the Fed could be expected. North of the US border, we highlight BoC’s interest rate decision. The bank is expected to remain on hold at 4.50% and currently, CAD OIS imply a probability of 94.48% for such a scenario to materialize. Should also the bank accompany the decision with a dovish statement, or a dovish tone in BoC Governor Macklem’s following press conference we may see the CAD slipping as the monetary outlook differentials may widen. Across the world, in the land of the down under, we note that RBA Deputy Governor Bullock stated that the bank would pause its rate hiking path even without the stress on the global banking sector, which highlighted the bank’s cautiousness. On a more fundamental level, we note that the recent tensions of US-Sino relationships regarding Taiwan, may have an adverse effect on the AUD given the close Sino-Australian economic ties. We expect Aussie traders to place considerable focus on Australia’s employment data for March during tomorrow’s Asian session, but also on China’s trade data for the same month, especially the import growth rate.

USD/CAD dropped lower yesterday breaking the 1.3465 (R1) support line, now turned to resistance. We tend to maintain a bearish outlook for the pair on a technical basis currently as long as the price action of USD/CAD remains below the downward trendline that has started to form since the 10^th of April. It should be noted that the RSI indicator is nearing the reading of 30, implying a rather bearish sentiment on behalf of the market for the pair, yet please note that the price action has reached the lower Bollinger band, which may slow down the bears or even force the pair to an upward correction. Should the pair continue to be under the spell of the bears we may see it aiming if not breaching the 1.3335 (S2) support level. Should the bulls take the reins, we may see USD/CAD reversing course, breaking the prementioned downward trendline in a first sign of a change in trend, break the 1.3465 (R1) resistance line and take aim or even reach the 1.3560 (R2) resistance level. Please note that as we have high-impact releases and monetary policy events for both sides of the pair, volatility may increase beyond usual activity as may also the direction of the pair unexpectedly change.

AUD/USD edged higher yesterday yet remained comfortably within the boundaries set by the 0.6700 (R1) resistance line and the 0.6630 (S1) support line. We tend to maintain a bias for a sideways motion of the pair within the prementioned levels, given also that the Bollinger bands have started to narrow implying lower volatility and that the RSI indicator seems to run along the reading of 50, implying a rather indecisive market. Yet financial releases for both sides of the pair could alter the pair’s direction either way in the next 24 hours. Should a selling interest be expressed, we may see the pair breaking the 0.6630 (S1) support line and aim for the 0.6565 (S2) support level. On the flip side should the pair find extensive buying orders along its path we may see it breaking the 0.6700 (R1) resistance line, which in turn could open the gates for the 0.6760 (R2) resistance level.     

Other highlights for the day:

During today’s European session, we note the release of Norway’s GDP rates for February. In the American session, oil traders may be interested in the release of the weekly EIA crude oil inventories figure. On the monetary front, we note that Richmond Fed President Barkin, BoE Governor Andrew Bailey and San Francisco Fed President Daly are expected to speak.

AUD/USD H4 Chart

Support: 0.6630 (S1), 0.6565 (S2), 0.6490 (S3)

Resistance: 0.6700 (R1), 0.6760 (R2), 0.6825 (R3)

USD/CAD H4 Chart

Support: 1.3335 (S1), 1.3230 (S2), 1.3140 (S3)

Resistance: 1.3465 (R1), 1.3560 (R2), 1.3655 (R3)

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Disclaimer:
This information is not considered as investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced, or hyperlinked, in this communication.

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