Trump’s Speech Overview
After long hours of waiting, the US President Donald J. Trump gave his speech, which was clearly the most optimistic presidential speech since the elections.
Staying away from attacking countries and the media was one of the surprises. His speech is fairly balanced today, which was welcomed by the markets.
What matters the most for the markets was the reassurance of the 1 Trillion Dollars of infrastructure spending, which kept the market optimistic, without looking at the actual plan.
Despite that, the current optimism might be limited and short lived. Why? Because the US president did not mention how he will secure the funding of these massive projects. Some would say that the Congress would approve it.
But it’s not that easy to pass such bill, and the question remains here which will be the key for the market, how and from where he will spend the 1 trillion dollars, while the expiration of the debt ceiling is around the corner.
USD Testing 101.70 Again
The US Dollar rallied again when the US President reassured the markets about the infrastructure spending plan, retesting its solid resistance area which stands at 101.70, which should be watched very carefully over the coming days.
So far, the US Dollar index is still forming the potential head and shoulder formation on the daily chart, while only a weekly close above the mentioned resistance would be the invalidation signal for such pattern. In return, another rally could be seen ahead. Yet, we still believe that the US Dollar rally is likely to be limited, and another leg lower is more likely in the coming weeks.
Eyes on Bank of Canada Decision Today
During the US session ahead, there are many economic figures will be released from the US. However, we will concentrate on the Bank of Canada rate decision, which likely to have a notable impact on the markets.
Moreover, today’s decision will be complex, especially that the US Crude Oil Inventories will be released 30 minutes after the Bank of Canada Decision.
The Bank of Canada is expected to keep the current policy unchanged including the Overnight rate at 0.50%, where there is only a slight room for a surprise.
Economic Data
The recent inflation figures showed a notable pick up, suggesting a possible inflation pressure in the coming months.
The CPI YoY increased to the highest level since October of 2014 at 2.13%, which is above the Bank of Canada target.
The Core CPI YoY also edged higher for the second month in a row, rising to 1.7% in January, posting the highest reading in three months.
The growth figures also showed some improvement, posting the 2nd quarterly growth in a row. One we have no seen since 2014. The MoM GDP also showed a consistent growth since June of last year, one we have not seen since 2013.
In general, the Bank of Canada is more likely to come with a balanced statement today, given the fact that the economic releases have been improving, but it’s not enough to spark an action by the central bank soon.
USDCAD Breakout?
Two days ago, USDCAD had been rising significantly and broke out of one of its tight range, rising above its entire Moving Averages on the daily chart, including 50,100 and 100 DAY MA’s.
Such rally is seen as a positive signal over the coming days. Yet, a stabilization above 1.3250’s is still needed to clear the way for further gains ahead.
Moreover, another solid resistance is ahead of the pair, which stands around 1.3360, which represents January’s resistance area.
A break of which would clear the way for further gains, probably above 1.34 over the coming days. Traders should keep an eye on Crude Oil prices today, as another rally, would cap USDCAD gains at some point.
