USD/CAD: Higher Oil Prices Should Support The Loonie

Do you want to know which are the Current Trading Positions of our contributors? Get a glance here.

GOLD: That Was The Best Day For Gold Investors In Three Years

• Spot gold rose to as high as USD 1,260.60 an ounce yesterday, its highest since February last year. Gold jumped 4% on Thursday, its biggest single-day percentage rally since 2013 as stock market turmoil stoked safe-haven demand. For the week, spot gold is up almost 6%, the biggest such gain since October 2011. US gold futures have risen more than 7% for the week, the sharpest jump since 2008.

• Safe-haven assets shone across the board. US 10-year Treasury yields hit their lowest since 2012 and the Japanese yen climbed to its highest in 15 months against the USD, while money continued to flow into gold-backed exchange traded funds. In contrast, base metals such as copper, iron ore, coal and nickel have shown few signs of life, while oil prices remain mired in depression.

• Gold was supported by dovish comments from Fed Chair Janet Yellen. She returned to Congress on Thursday and again stressed that the U.S. central bank was not on a "pre-set" path to return policy to "normal" given a worsening meltdown in global stock markets. As she did at a House of Representatives panel on Wednesday, Yellen on Thursday warned the Senate Banking Committee against jumping to conclusions about the extent of the overseas threat to the growing US economy.

• Earlier on Thursday the fed funds future markets even suggested the possiblity of a Fed rate cut later this year, but Yellen reiterated her view that a cut, while it cannot be ruled out, is "not the most likely scenario." As it stands, traders give an 8.0% chance of a rate hike this year, according to CME FedWatch.

• After a strong move yesterday there is a risk of small correction as a result of profit taking on gold-long positions in the coming days. A corrective move is also likely if only risk appetite improves. We will be looking to get long at 1200.

EUR/GBP: Technical Analysis Suggests A Pause In Short-Term Bullish Trend

• Eurostat said GDP in the Eurozone rose 0.3% qoq in the last three months of last year, the same as in the July-September period. Year-on-year, the euro zone economy expanded 1.5%.

• Separate data showed Eurozone industrial output fell 1% mom in December for a 1.3% yoy fall.

• British Office for National Statistics said that construction output fell 0.4% in the fourth quarter after a 1.7% decline in the third quarter. Construction output rose 1.5% in December alone, in line with market expectations after a 1.1% drop in November.

• Long shadow on Thursday’ EUR/GBP candlestick line signals a pause in short-term bullish trend. We cancelled our bid at 0.7710 and now stay flat, as we expect a corrective move in the near term. The medium-term outlook remains bullish.

USD/CAD: Higher Oil Prices Should Support The Loonie

• The 1.3850/1.4000 area in USD/CAD has held intact for a few sessions now, but there are signs of a big downward move in the near term. We expect stronger improvement in oil prices in the coming session, which should support CAD bulls.

• Oil prices jumped today on hopes of a coordinated production cut sparked by comments from the energy minister of OPEC member United Arab Emirates. UAE Energy Minister Suhail bin Mohammed al-Mazrouei said the OPEC was willing to talk with other exporters about cutting output. He added that cheap oil was already forcing some output reductions which would help rebalance the market.

• WTI futures gained as much as 6% today after hitting lows not seen since 2003 in the previous session. The jump in WTI prices could have been a result of US producers unwinding hedges they had locked in at higher prices in order to generate cash to service debt and costs.

• We keep our short USD/CAD positions unchanged (short term position was opened at 1.3860 and long-term was opened at 1.3920). We went EUR/CAD short at 1.5705 today and expect stronger fall to 1.5200 in the coming sessions.

------- 
Who were the best experts in 2015? Have your say and vote for FXStreet's Forex Best Awards 2016! Cast your vote now!
-------