Major currencies are traded narrowly on Thursday after traders turned their attention to the European Central Bank (ECB) meeting later in the day that the monetary policy outlook is expected, while the Australian and Canadian dollars came close to 2-month lows.
The US Dollar Index (DXY), which tracks the greenback versus a basket of its main rivals, is looking to revert yesterday’s pullback above the 96.80 region. The rally in the greenback seems to have met a solid resistance in the 97.00 neighbourhood for the time being.
Further bullish attempts in the greenback are expected in the near term, always with the immediate target at the YTD peaks near 97.40.
The absence of further news on the US-China trade dispute seems to have poured cold water over expectations of a deal in the near term, removing some optimism from the risk-associated space. However, the upcoming meeting between Trump and Xi Jinping is expected to spark bouts of volatility in the days ahead.
The Euro fell on Thursday to 1.1307 USD, which is about 1.0% below the one-month high reached on Thursday last week. The EUR/USD is hugging the 1.1300 level once again, trading in a narrow range as tension mounts ahead of the all-important decision by the European Central Bank.
However, the bears remain in control and the momentum points to the downside. The Relative Strength Index is leaning lower without pointing to oversold conditions. And the EUR/USD pair is trading well below the 50 and 200 Simple Moving Averages.
Support awaits at 1.1290 USD, which supported EUR/USD earlier in the week.
The ECB is expected to reduce its economic growth forecasts and probably give its strongest signal that it renews incentives in the form of cheaper long-term bank loans to combat the economic downturn.
The market already calculated the worsened economic projections for the Eurozone, so the ECB meeting may give impestus to the EUR
The yen and the Swiss franc have risen as investors seek shelter for their assets in safe havens, amid new signs of tension between the United States and North Korea, and renewed fears of slowing global economic growth.
On Wednesday, the OECD again cut its global economic outlook in 2019 and 2020 following previous declines in November, warning that trade disputes and uncertainties about Britain’s exit from the European Union will affect world trade and business.
Australian hit its 2-month low as investors lowered their expectations of a change in interest rates in the country to counter the weaknesses of the economy.
The Australian dollar reached a two-month minimum of 0.7020 USD after data showed that retail sales in the country rose by 0.1% in January while expectations were for an increase of 0.3%. On Thursday, the Australian dollar rose slightly to 0.7044 USD.
The Australian currency is already suffering from losses from the previous day when economic growth figures in the fourth quarter strengthened evidence of slowing domestic momentum, as well as expectations of a fall in interest rates this year.
A one-week descending channel pattern has guided the Australian Dollar lower against the US Dollar. The currency pair depreciated by about 70 base points during Wednesday’s trading session. The 50-hour simple moving average was providing resistance for the AUD/USD currency pair at 0.7052 during the first half of today’s trading session.
If the exchange rate passes the 50-hour SMA, the next target for bullish traders will be near a swing high of 0.7092.
Canadian dollars also hit its 2-month low. Bank of Canada (BoC) said yesterday that there is “increased uncertainty” about the future of interest rates, so it will keep interest rates stable at 1.75%, as analysts expected.
The Canadian dollar dropped to 1.3457 USD after BoC’s last statement that it would not raise interest rates, which is the lowest level of the currency since January 4. On Thursday, the Canadian dollar rose slightly, to 1.3436 USD.
The USD/CAD exchange rate is currently trading near the upper boundary of a medium-term ascending channel pattern at 1.3436. If the resistance level formed by the upper boundary of the channel pattern holds, a decline towards the 50-hour SMA at 1.3384 could be expected within this session.
Moreover, If the pair passes the medium-term channel, the next target will be near the Janaury 29 high at 1.3700.