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For the 24 hours to 23:00 GMT, the USD declined 0.10% against the CAD and closed at 1.3272.

Data showed that trade deficit widened more-than-expected to C$2.1 billion in November, following a revised deficit of C$0.9 billion in the previous month

In the Asian session, at GMT0400, the pair is trading at 1.3230, with the USD trading 0.32% lower against the CAD from yesterday's close.

The pair is expected to find support at 1.3197, and a fall through could take it to the next support level of 1.3164. The pair is expected to find its first resistance at 1.3293, and a rise through could take it to the next resistance level of 1.3356.

Going ahead, investors would keep an eye on the Bank of Canada's interest rate decision followed by Canada's housing starts for December, slated to release later in the day.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, Gold traded flat against the USD and closed at USD1286.10 per ounce.

In the Asian session, at GMT0400, the pair is trading at 1284.30, with gold trading 0.14% lower against the USD from yesterday’s close.

The pair is expected to find support at 1280.20, and a fall through could take it to the next support level of 1276.10. The pair is expected to find its first resistance at 1288.40, and a rise through could take it to the next resistance level of 1292.50.

The yellow metal is showing convergence with its 20 Hr moving average and trading below its 50 Hr moving average.

For the 24 hours to 23:00 GMT, Silver rose 0.54% against the USD and closed at USD15.71 per ounce.

In the Asian session, at GMT0400, the pair is trading at 15.70, with silver trading 0.06% lower against the USD from yesterday’s close.

The pair is expected to find support at 15.59, and a fall through could take it to the next support level of 15.49. The pair is expected to find its first resistance at 15.77, and a rise through could take it to the next resistance level of 15.85.

The white metal is showing convergence with its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, Crude Oil rose 2.09% against the USD and closed at USD49.80 per barrel, led by global efforts to contain crude output and optimism around US-China trade talk. Additionally, the American Petroleum Institute (API) reported that US crude oil inventories dropped by 6.1 million barrels to 437.6 million barrels in the week ended 04 January 2019.

In the Asian session, at GMT0400, the pair is trading at 50.49, with oil trading 1.39% higher against the USD from yesterday's close.

The pair is expected to find support at 49.08, and a fall through could take it to the next support level of 47.68. The pair is expected to find its first resistance at 51.25, and a rise through could take it to the next resistance level of 52.02.

Crude oil is trading above its 20 Hr and 50 Hr moving averages.

Short term Elliott Wave view in USDCAD shows that the decline from 12/31/2018 high (1.3669) is unfolding as a 5 waves impulse Elliott Wave structure. Down from 1.3669, Wave 1 ended at 1.3563, wave 2 ended at 1.3662, wave 3 ended at 1.3263, and wave 4 ended at 1.3323. We can see a momentum divergence with momentum showing a higher low while price showing a lower low.

This suggests that wave 5 is near complete and we can soon see a 3 waves rally to correct the decline from 12/31/2018 high. To get an estimate on how far the bounce can go, it should ideally end around 50 – 61.8% fibonacci retracement of the decline from 1.3669. This however is more of a guideline and not a rule. The actual rally can be deeper or shallower than the 50 – 61.8% retracement guide. The most important level remains to be 1.3669.

As the move lower from 1.3669 is impulsive, the bounce should fail below 1.3669 and give us at least another 5 waves down to end a zigzag Elliott Wave structure at minimum. The medium term outlook therefore favors further downside although short term we may see a bounce soon.

USDCAD 1 Hour Asia Elliott Wave Chart

General Trend:

• Automakers drive gains in Shanghai amid renewed stimulus talk, Great Wall Motor up 10%; appliances makers also rise on the news
• US/China Trade delegation member from the US: "Its been a good one for us"
• China comments: US/China trade agreement must involve "give and take" - Chinese State Media
• Insurers in Hong Kong supported by broker commentary
• Xiaomi announces lockup agreement with controlling shareholders, follows recent share price declines
• Iron/Steel companies and Softbank rise in Japan
• Fast Retailing under performs ahead of Thursday’s earnings report
• Energy shares rise in Australia
• WTI Crude trades above $50/bbl (first time since Dec)
• USD trades generally weaker amid Trump comments, Fed in focus
• US President Trump does not comment on emergency powers in speech
• Trump expected to meet Senate Republicans on Wed, Fed minutes also to be released

Headlines/Economic Data

Japan

• Nikkei 225 opened +0.8%
• 5401.JP South Korea plaintiffs in forced labor case related to World War 2 are seeking to seize some of the company's assets in South Korea - Local Press
• (JP) JAPAN NOV LABOR CASH EARNINGS Y/Y: 2.0% V 1.2% PRIOR; REAL CASH EARNINGS Y/Y: 1.1% V 0.4%E
• 6758.JP Looking at alternative plans for some production in China if tariffs are going to increase - Nikkei
• (JP) Bank of Japan (BoJ) Survey: Japan households see 3% inflation in 1 year v 3% prior; See 2% inflation in 5 years v 2% prior

Korea

• Kospi opened +0.4%
• (KR) South Korea Dec Unemployment Rate: 3.8% v 3.9%e; Jobs added: 34.0K v 165.0K prior
• 005380.KR To recall 79K diesel vehicles for faulty emission related parts
• 017670.KR CEO: Will set up intermediate holding company within this year
• (KR) South Korea analysts note that North Korea's threatened "new way" to deal with US in its New Years address could be China - Yonhap

China/Hong Kong

• Hang Seng opened +1.4%, Shanghai Composite +0.4%
• (US) China/US trade talks have reportedly narrowed differences on trade, made progress on issues including purchasing more US trade goods; talks have been extended by 1 day into tomorrow – press
• (CN) Certain cities in China said to be tightening housing fund policies - Chinese press
• (CN) China NDRC official reiterates government to introduce policies to support domestic consumption, policies to focus on areas including autos and home appliances - Chinese state media
• (CN) China PBoC Open Market Operation (OMO): Skips OMO operations for the third consecutive day; Net: CNY40B drain v CNY20B drain prior
• (CN) China may set higher budget deficit to GDP target for 2019, speculated at 2.8% (vs 2.6% expected for 2018) - US financial press
• (CN) China PBoC sets yuan reference rate: 6.8526 v 6.8402 prior

Australia/New Zealand

• ASX 200 opened +0.4%
• (AU) AUSTRALIA NOV BUILDING APPROVALS M/M: -9.1% V -0.3%E; Y/Y: -32.8% V -24.8%E
• (AU) Australia Nov Job Vacancies: 1.3% v 1.1% prior
• RMS.AU Reports Q2 production 52.6K oz v 48-52K guided

North America

• (US) FDA said to consider slowing down drug approvals as a result of partial government shutdown - US financial press
• (US) Weekly API Oil Inventories: Crude: -6.1M v -4.5M prior
• NBR To cut dividend 83% to $0.01/shr in Q2'19 (indicated yield 1.52%); Guides FY19 capex $400M
• SWKS Cuts Q1 $1.81-1.84 v $1.91e (prior $1.91), Rev $970M v $1.01Be (prior $1.0-1.02B) due to unit weakness across our largest smartphone customers
• (US) President Trump: There is a growing security crisis at the US southern border, all Americans are hurt by uncontrolled illegal immigration, strains resources, impacts African Americans and Hispanics the most; border wall will very quickly pay for itself. Govt remains shut down only because Democrats will not fund border security, situation could be solved in 45 minute meeting, have invited parties to White House tomorrow

Europe

• (UK) UK govt spokesperson: the defeat on the 'no-deal' Brexit amendment vote today does not change the fact that the UK will leave the EU on March 29
• (IE) Ireland Foreign Min Coveney: PM May has made it clear she is not looking for an extension to Article 50; want to avoid a no-deal Brexit
• World Bank cuts 2019 Europe growth forecast to 1.6%, -0.1ppts from prior forecast - press
• (UA) UAE Energy Min/OPEC President Suhail Al Mazroui: OPEC+ is eager to correct oil market; do not see major changes to oil market in 2019 - press

Levels as of 12:50ET

• Hang Seng +2.8%; Shanghai Composite +1.6%; Kospi +2.0%; Nikkei225 +1.1%; ASX 200 +1.0%
• Equity Futures: S&P500 +0.4%; Nasdaq100 +0.6%, Dax +0.1.0%; FTSE100 +0.8%
• EUR 1.1435-1.1466; JPY 108.67-109.00 ; AUD 0.7135-0.7171; NZD 0.6722-0.6758
• Feb Gold -0.2% at $1,283/oz; Feb Crude Oil +1.6% at $50.58/brl; Mar Copper +0.8% at $2.67/lb

Daily Pivots: (S1) 1.3254; (P) 1.3288; (R1) 1.3309; More...

USD/CAD drops further to as low as 1.3226 so far today as fall from 1.3664 extends. There is no sign of bottoming yet. Intraday bias stays on the downside for 61.8% retracement of 1.2781 to 1.3664 at 1.3118. We'll look for bottoming sign below there. On the upside, above 1.3323 minor resistance will turn bias neutral first.

In the bigger picture, the medium term rise from 1.2061 (2017 low) might continue further. But the structure of such rise is not clearly impulsive so far. Hence, we'd stay cautious on strong resistance from 61.8% retracement of 1.4689 (2016 high) to 1.2061 at 1.3685 and 1.3793 resistance to limit upside, and bring medium term topping. But in any case, medium term outlook will stay bullish as long as channel support (now at 1.2993) holds. Sustained break of 1.3793 will pave the way to retest 1.4689 (2015 high).

Commodity currencies are trading broadly higher today as risk appetite is lifted by optimism over US-China trade negotiations in Beijing. Canadian Dollar is additionally supported by rally in oil price, with WTI breaking 50 handle. On the other hand, Yen is trading as the weakest one, followed by Swiss Franc and Dollar. Euro is not too far away. BoC rate decision will be a bit of wild card today. While it's expected to keep monetary policy unchanged, it's far from being certain. And the new economic projections might not be as dovish as expected.

Technically, USD/CAD's decline from 1.3664 is in progress for next near term fibonacci level at 1.3118. While the fall is steep and deep, it's too early to declare medium term bearish reversal yet. Reactions to 1.3118 might provide some clues though. Yen crosses are starting to lose upside momentum, as most apparently in EUR/JPY and GBP/JPY. 122.84 and 136.61 minor support levels will possibly be back in focus today. EUR/USD, GBP/USD and USD/CHF are stuck in tight range. Dollar tried to rebound with treasury yield overnight but couldn't sustain. 0.9789 in USD/CHF, 1.1499 in EUR/USD and 1.2814 in GBP/USD will be watched as sign of renewed Dollar weakness.

In other markets, DOW closed up 1.09% overnight at 23787.45, slightly above 23713.93 fibonacci level. Similarly, S&P 500 also closed up 0.97% at 2574.41, also above equivalent 2573.61 fibonacci level. NASDAQ rose 1.08% but is kept below 6932.44 fibonacci level. 10 year yield rose 0.034 to 2.718, back above 2.7% handle. In Asia, Nikkei is currently up 1.25%. Singapore Strait Times is up 1.11%. Hong Kong HSI leads the rally and is up 2.68%. China Shanghai SSE is up 1.67%. Japan 10-year JGB yield is up 0.0341 at 0.032, back positive again. Overall developments are positive.

China-US trade talks enter into unscheduled third day with good progress

Global stocks are lifted by news that China-US trade talks in Beijing are extending into an unscheduled third day, with signs of good progress. It's confirmed by a US Trade Representative spokesperson who said "a statement will likely follow then." Nevertheless, the extension itself is affirmative as both sides need time and efforts to full exchange their views before getting close to an agreement by 90-day deadline on March 2.

Trump tweeted yesterday that "Talks with China are going very well!" Reuters also reported quoting unnamed source saying "Overall the talks have been constructive. Our sense is that there's good progress on the purchase piece." However, it's unknown how China is going to address a key issue of intellectual property theft.

But at least, this week, China issued long-awaited approvals for import of five genetically modified crops which would boost import of US grains. There was also another larger purchase of US soybeans. These are widely seen as gestures of good will.

Separately, the China Daily said in an editorial China "will not seek a solution to the trade frictions by making unreasonable concessions, and any agreement has to involve give and take from both sides."

Trump's oval speech did no breakthrough on government shutdown

Trump used his Oval speech to bluntly demand the Congress to provide USD 5.7B funding to build the border wall. Trump questioned "How much more American blood must be shed before Congress does its job?" and pointed to the numbers of crimes committed by illegal immigrants. But he didn't declare national emergency to use military funds for the wall.

Democratic speaker of the House of Representatives Nancy Pelosi responded and said "The president has chosen fear. We want to start with the facts". She added "The fact is, President Trump has chosen to hold hostage critical services for the health, safety and well-being of the American people and withhold the paychecks of 800,000 innocent workers across the nation, many of them veterans."

Senate Democratic leader Chuck Schumer said "The symbol of America should be the Statue of Liberty, not a 30-foot wall". And, "So our suggestion is a simple one. Mr. President: Reopen the government and we can work to resolve our differences over border security. But end this shutdown now."

So, overall, there is no sign of a breakthrough regarding the shutdown yet, which is already in it's third week.

BoC to stand pat, might downgrade growth forecasts

BoC rate decision will be a major focus today. We'd maintain that BoC will keep policy rate unchanged at 1.75%. Besides releasing the statement and Monetary Policy Report, the central bank would also update the economic forecasts and host a press conference. The focus of the meeting would be possible downward revisions on the growth outlook and forward guidance on the policy stance. We expect the central bank to maintain the dovish tone laid down in the December meeting.

We expect BOC to trim its inflation forecast due to lower energy prices. Current rebound in oil price was mainly driven by the Saudi-led production cut and US-China trade talk. We believe the boosts to oil prices are short-lived. Global economic slowdown this year is prone to limit demand for oil, limiting the rally in oil prices. BOC should also downgrade its GDP growth estimate modestly. In the near- term growth would be dampened by Alberta's compulsory reduction in oil output, effective in the New Year. In the longer-term, the country's economic growth would be affected by the overall slowdown in the global economy.

More in: BOC Preview – No Change in Rates, Dovish Stance Accompanied by Modest Forecast Downgrades

Also on BoC: Bank of Canada to Put Rate Hikes Aside for Now

On the data front

Australia AiG performance of services dropped to 52.1 in December, down from 55.1.Building approvals dropped sharply by -9.1% mom in November versus expectation of -0.3% mom. Japan labor cash earnings rose 2.0% yoy in November versus expectation of 1.3% yoy.

German trade balance, Eurozone unemployment rate and Swiss CPI will be featured in European session. Later in the day, Canada will release housing starts and BoC rate decision. US will release FOMC minutes.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.3254; (P) 1.3288; (R1) 1.3309; More...

USD/CAD drops further to as low as 1.3226 so far today as fall from 1.3664 extends. There is no sign of bottoming yet. Intraday bias stays on the downside for 61.8% retracement of 1.2781 to 1.3664 at 1.3118. We'll look for bottoming sign below there. On the upside, above 1.3323 minor resistance will turn bias neutral first.

In the bigger picture, the medium term rise from 1.2061 (2017 low) might continue further. But the structure of such rise is not clearly impulsive so far. Hence, we'd stay cautious on strong resistance from 61.8% retracement of 1.4689 (2016 high) to 1.2061 at 1.3685 and 1.3793 resistance to limit upside, and bring medium term topping. But in any case, medium term outlook will stay bullish as long as channel support (now at 1.2993) holds. Sustained break of 1.3793 will pave the way to retest 1.4689 (2015 high).

Economic Indicators Update

Canadian Dollar remains the strongest one for the week, with help from further rebound in oil price. WTI reaches as high as 50.83 so far today as the corrective rise from 42.05 extends. For now, further rally is expected as long as 48.46 minor support holds, target cluster resistance at 54.61, 38.2% retracement of 77.06 to 42.05 at 55.42. We'd expect strong resistance from there to limit upside.

Accompanying that USD/CAD would be target 61.8% retracement of 1.2781 to 1.3664 at 1.3118.

Meanwhile, another key factors on Canadian Dollar is today's BoC rate decision. We'd maintain that BoC will keep policy rate unchanged at 1.75%. Besides releasing the statement and Monetary Policy Report, the central bank would also update the economic forecasts and host a press conference. The focus of the meeting would be possible downward revisions on the growth outlook and forward guidance on the policy stance. We expect the central bank to maintain the dovish tone laid down in the December meeting.

We expect BOC to trim its inflation forecast due to lower energy prices. Current rebound in oil price was mainly driven by the Saudi-led production cut and US-China trade talk. We believe the boosts to oil prices are short-lived. Global economic slowdown this year is prone to limit demand for oil, limiting the rally in oil prices. BOC should also downgrade its GDP growth estimate modestly. In the near- term growth would be dampened by Alberta's compulsory reduction in oil output, effective in the New Year. In the longer-term, the country's economic growth would be affected by the overall slowdown in the global economy.

More in: BOC Preview – No Change in Rates, Dovish Stance Accompanied by Modest Forecast Downgrades

Also on BoC: Bank of Canada to Put Rate Hikes Aside for Now

Trump used his Oval speech to bluntly demand the Congress to provide USD 5.7B funding to build the border wall. Trump questioned "How much more American blood must be shed before Congress does its job?" and pointed to the numbers of crimes committed by illegal immigrants. But he didn't declare national emergency to use military funds for the wall.

Democratic speaker of the House of Representatives Nancy Pelosi responded and said "The president has chosen fear. We want to start with the facts". She added "The fact is, President Trump has chosen to hold hostage critical services for the health, safety and well-being of the American people and withhold the paychecks of 800,000 innocent workers across the nation, many of them veterans."

Senate Democratic leader Chuck Schumer said "The symbol of America should be the Statue of Liberty, not a 30-foot wall". And, "So our suggestion is a simple one. Mr. President: Reopen the government and we can work to resolve our differences over border security. But end this shutdown now."

So, overall, there is no sign of a breakthrough regarding the shutdown yet, which is already in it's third week.