- Dow Jones Industrial Average cracked 26,000, but then retreated
- The US dollar gave back its overnight gains
- The Loonie looks rangebound ahead of the Bank of Canada meeting
- Many expect a “sell the rumour buy the fact” trade on a cautious BoC statement
By Michael O’Neill
NY Focus: FX traders were data deprived and directionaly challenged on Tuesday. The US dollar sellers so prevalent in Asia and Europe were nowhere to be found in New York. The New York Empire State Manufacturing Index came in at 17.7, which was below both the forecast 18.0 and the upwardly revised December result. However, the report was viewed as still robust, so the news was not a reason to sell US dollars.
The Dow Jones Industrial Average
hit 26,086.12 just after the open, and then dropped steadily back to 25,702.99 by mid-afternoon. Prices ticked higher into the close, finishing with a minuscule 0.4% loss for the day. General Electric (GE: NYSE) announced over $11 billion in charges from its insurance and new tax laws.
Even though the Empire State Manufacturing Index came in below forecast, it was still viewed as robust, so the data was no reason to sell USD. Photo: Shutterstock
dipped to 1.2196, just above support at 1.2190 after breakfast, and then climbed steadily throughout the day, clawing back all of the losses seen in Europe and closing at 1.2264. “Sources” were at it again. Reuters quoted them as saying “the ECB was unlikely to tweak its policy message as policymakers need more time to assess the outlook for the economy and the euro".
rallied along with EURUSD, rising from 1.3743 at the open and ending at 1.3792, underpinned by broad US dollar weakness.
opened with a bid and rose from ¥110.70 to ¥110.85 before collapsing to ¥110.25 in the afternoon. Continuing concerns about the Bank of Japan’s “tapering tweak” and US dollar weakness was behind the move.
The Bank of Canada interest rate decision, policy statement, Monetary Policy Report and press conference are the key events for Wednesday, at least for USDCAD traders. A 25 basis point rate hike is already priced in.
Many analysts are expecting a “sell the rumour buy the fact” trade on a cautious BoC statement. They expect USDCAD
to rally. I think a USDCAD rally is a sell, based on robust data and high oil prices with 1.2250 a reasonable target.
Michael O'Neill is an FX consultant, currency strategist and author of the Trade of the Day at Loonieviews.net. Follow Mike or post your comment below to engage with Saxo Bank's social trading platform.