USD Remains Stable As Traders Eye US GDP Rate For Q3

Oct 28 21, 09:25 GMT

The USD remained rather stable yesterday against a number of its counterparts. An exception could be the JPY as BoJ’s interest rate decision was released during today’s Asian session and the CAD which strengthened due to BoC’s interest rate decision. BoJ as was expected remained on hold and projected low inflation for years to come implying that the ultra-lose monetary policy is to continue, reinforcing expectations that it will remain more dovish than other central banks. On the contrary, BoC yesterday had great confidence on display maintaining its interest rates unchanged yet ending its QE bond buying program in a clear signal that rate hikes are coming. Today we note the release of the US weekly initial jobless claims figure, yet we highlight the US GDP rate advance for Q3 as the main economic data of the day which could create considerable volatility for the markets. The rate is forecasted to decelerate and reach on an annualized basis 2.7% qoq if compared to Q2’s 6.7% qoq and if so could weaken the USD as it would imply a considerable slowdown in the expansion of growth for the US economy. On the other hand, attention is placed also on the US stockmarkets and may we remind you that we get a number of earnings reports for high profile companies such as Apple (#AAPL) and Amazon (#AMZN). Also, on the commodities front, we highlight the drop of WTI prices, as the EIA reported a substantial built up of oil inventories in the US oil market.

USD/CAD dropped yesterday from the highs of the 1.2425 (R1) resistance line to the lows of the 1.2330 (S1) level. As the slight bullish tendencies which the pair displayed were interrupted our bias for a sideways motion between the prementioned levels has been reinforced. Should the bulls take over, we may see USD/CAD breaking the 1.2425 (R1) line and aim for the 1.2500 (R2) level. Should the bears be in charge of the pair’s direction we may see USD/CAD breaking the 1.2330 (S1) support line and aim for the 1.2250 (S2).

EUR traders focus on ECB’s interest rate decision

EUR traders are expected to focus on ECB’s interest rate decision today and the bank is widely expected to remain on hold keeping its refinancing rate at 0.0% and the deposit rate at -0.50%. Market participants could be watching for any changes in the bank’s perception regarding the inflationary pressures and whether those are still considered to be of a transitory nature and any shift to the contrary in that perception could prove to be market moving. At the same time besides the inflationary pressures, we also have to note the worries for the slowing growth of the Zone’s economy, with the main focus being on the manufacturing sector which also is the spearhead for the German and Eurozone’s economy. We would expect the bank to maintain a dovish tone, probably with ECB’s President Christine Lagarde pushing against market expectations for any earlier or faster tightening of the bank’s monetary policy and reiterating that price increases are of temporary nature while the bank is still “pretty far away” from raising rates. Such dovishness could weigh on the common currency and we highlight that volatility for EUR pairs could be extended besides the time of the release also during ECB President Lagarde’s press conference 45 minutes later.

EUR/USD maintained a sideways motion yesterday just below the 1.1615 (R1) resistance line. We tend to maintain a bias for a sideways motion for the pair, yet ECB’s interest rate decision could alter the pair’s direction today. Should sellers take the initiative, we may see EUR/USD aiming if not breaking the 1.1520 (S1) line, paving the way for the 1.1445 (S2) support level. Should buyers be in charge, we may see EUR/USD breaking the 1.1615 (R1) level and take aim for the 1.1695 (R2) line.

Today’s events and expectations

Today we also note Sweden’s GDP rate for Q3, Germany’s employment data and preliminary HICP rates as well as Eurozone’s sentiment indicators all for October.

USD/CAD H4 Chart