Bank of Canada delivered yet another hike of 25 basis points yesterday, as was widely expected and the Loonie strengthened about 90 pips against the USD, upon release and shortly after. The accompanying statement contained more hawkish elements as it dismissed worries about the recent slowdown of the CPI rate. It dropped the gradual approach to hikes, to show that no mechanical path exists and stated that rates will need to rise to a neutral stance. It also expects a boost in investment and export on USMCA and LNG deals, while at the same time accepts that a slowdown of the US GDP is possible in 2019. In the following press conference, BoC Governor Poloz stated that rate changes can be faster or slower. Currently the market seems to expect the next rate hike in January 2019 and that could provide a more bullish mood for the Loonie.

USD/CAD experienced high volatility yesterday, breaking the 1.3065 (R1) and the 1.3015 (S1) support lines, however corrected later on above the latter. We continue to have a bearish outlook for the pair, after the BoC’s interest rate decision. It should be noted though, that signs of stabilisation started to occur during the Asian session. Should the bears continue to dictate the pair’s direction, we could see it breaking the 1.3015 (S1) support line and aim for the 1.2965 (S2) support barrier. Should on the other hand the bulls take over, we could see the pair breaking the 1.3065 (R1) resistance line and aim for the 1.3115 (R2) resistance hurdle.

ECB Interest rate decision

The ECB is to release its own interest rate decision today (11:45, GMT) and is widely expected to remain on hold, currently EUR OIS imply a probability for the bank to remain on hold of 95.14%. Should that be the case, we could see the market’s attention turning to the accompanying statement and the following press conference. Comments about the unwinding of the QE program could exist and that the next rate hike could occur through summer 2019 repeated. The press conference (12:30, GMT) may prove the real market mover of the event, and some positive comments could be made for the CPI rates, while worries could exist about the GDP growth rate, especially after the preliminary release yesterday, of October’s PMIs. It should be noted that October’s preliminary PMI’s, dropped more than expected and set a bearish mood for the EUR by weakening it.

EUR/USD dropped yesterday, breaking the 1.1430 (R1) support line (now turned to resistance) and testing the 1.1385 (S1) support line. The pair’s direction today, may prove to be heavily dependent on ECB’s interest rate decision and the following press conference. Should the pair continue to be under the market’s selling interest, we could see it breaking the 1.1385 (S1) support line and aim for the 1.1345 (S2) support area. If the market favours the pair’s long positions, we could see the pair, breaking the 1.1430 (R1) resistance line and aim for the 1.1480 (R2) resistance level.

In today’s other economic highlights:

In the European session we get Germany’s Ifo Business Climate indicator for October and from Norway, Norges bank’s interest rate decision. Later on, we get from Turkey CBRT’s interest rate decision and in the American session, we get from the US, the durable goods orders growth rates as well as the pending home sales growth rate, both for September. As for speakers, Fed’s Richard Clarita speaks.

USD/CAD H4

• Support: 1.3015 (S1), 1.2965 (S2), 1.2915 (S3)

• Resistance: 1.3015 (R1), 1.3065 (R2), 1.3115 (R3)

EUR/USD 4H

• Support: 1.1385 (S1), 1.1345 (S2), 1.1300 (S3)

• Resistance: 1.1430 (R1), 1.1480 (R2), 1.1525 (R3)