US Brief: top Trade Setups in Forex – BOC Monetary Policy Decision Ahead!

The USD/CAD rose 0.2% to 1.3072. Government data showed that Canada's manufacturing sales declined 0.6% on month in November (-0.5% estimated). Meanwhile, the Bank of Canada is expected to hold its benchmark rate at 1.75% unchanged later today, and Canada's CPI is anticipated to grow 2.3% on year in December (+2.2% in November).

Other Commodity-linked currencies were broadly lower against the greenback. AUD/USD dropped 0.4% to a one-month low of 0.6848 and NZD/USD fell 0.2% to 0.6595.

USD/JPY - Sideways Trading Continues 

The BOJ kept its short term interest rates target at -0.1% and a pledge to guide 10-year government bond yields at 0%; this was already expected in the market.

The Bank also said that despite the overseas risks have decreased, but they persist, and Bank would not hesitate to ease further if risks increased.

The officials of BoJ hope that the government's $122 Billion fiscal packages will offset the weakness from the economy, which was driven by lower exports and supply disruptions that weighed on factory output.

The raised growth forecast from Japan raised the Japanese Yen on Tuesday and dragged the USD/JPY prices.

In the absence of any economic event from the United States, the USD/JPY pair was left to follow the international news and highlights from Japan. After the US traders came back in the market from 3 days long weekend, they started to take their positions.

USDJPY - Daily Technical Levels

USD/JPY - Daily Trade Sentiment

The USD/JPY sideways trading continues for another day as the pair maintains the 110.250 - 109.800 trading range. The USD/JPY is trading with a neutral bias staying over a support level of 109.800. On the 4-hour chart, the 50 periods EMA is keeping the USD/JPY bullish above 109.800. 

The USD/JPY is likely to find support around 109.800, along with resistance around 110.300. A bullish crossover of 110.300 can drive buying until 110.650. Let's stay bullish above 109.92 and bearish below this level today. 

USD/CAD - Sideways Trading Continues 

The USD/CAD prices closed at 1.30690 after placing a high of 1.30797 and a low of 130439. Overall the movement of the USD/CAD pair remained bullish throughout the day. The Canadian dollar weakened against the US dollar on Tuesday amid the fall in crude oil prices and weaker than expected data from Canada.

The WTI Crude Oil Prices fell on Tuesday after the news came in that a well-supplied global market of oil would provide enough oil supplies that would cover Libya's production cut. The pipeline that connects Libya's oil fields to the international coast has been blocked by the military, which raised the dears of output cut of crude oil.

However, reports came in on Tuesday that the FatihBirol, the head of Energy Information Administration (EIA), said that he expected the market to be in surplus by a million barrels per day in the first half of the year. He told Reuters Global Markets Forum that there was an abundance of energy supply in terms of oil & gas. He also added it was the same reason that disruptions in Middle-East failed to raise international oil prices. 

After this news, crude oil prices raised in the previous week started to fell on Tuesday and gave pressure on commodity-linked currency – Loonie.

Furthermore, the Canadian Factory sales were also decreased by 0.6% in November amid the rail transportation disruptions. Analyst had forecast the drop as 0.3%, which was less than the actual 0.6%, and it weighed on the Canadian dollar.

The weaker economic data and fall in crude oil prices supported the USD/CAD pair on Tuesday and raised it above 1.30700 level.

On the other hand, the Bank of Canada will publish its Monetary Policy Report and its Rate Statement on Wednesday. The Bank is expected to hold its rates at 1.75% and leave its monetary policy unchanged.

Earlier this month, the governor of Bank of Canada, Stephen Poloz, said that despite the phase-one agreement between the US & China, there were still uncertainties about what this deal would mean to Canadian exports as the tariffs were still on their place. Canada sends about 75% of its exports to the United States.

The market will keep an eye on how Poloz looks at the Phase-one trade deal of US & China, and the statement of Poloz will also be under the focus of traders to further take their positions accordingly.

USD/CAD - Daily Technical Levels

USD/CAD - Daily Trade Sentiment

On Wednesday, the USD/CAD is trading in a narrow range of 1.3095 - 1.3040 for a second consecutive week. The USD/CAD's break of 1.3102/4 resistance mark can validate short term bottoming at 1.2951.

In addition to this, the bullish bias can then be seen above the 50 EMA, which is now holding the pair above 1.3040. Whereas, a bearish breakout of 1.3040 level can extend selling until 1.2980 and 1.2950. Let's consider taking sell trade below 1.3035 via sell stop. 

AUD/USD – Double Bottom Support Eyed

The AUD/USD is flashing red and trading on the bearish track ahead of the Aussie employment data report later in the week. The AUD/USD is currently trading at 0.6837 and consolidates in the range between the 0.6827 - 0.6848. 

It is worth to mention that the downbeat Australian data heavily weighted the Australian dollar, as well as all eyes on the Reserve bank of Australia meeting which is scheduled to happen on February 4 after the very depressive data report releases (Apart from strong retail sales report) and the bushfire news.

At the past front, the RBA's delivered three rate cuts during 2019 were considered very worst for the Australian dollar which extended the 2018 decline, testing the 200-day moving average on three times, failing badly to understand it and after falling from a 2019 high of 0.7295 to a 2019 low of 0.6670. Despite the idea of QE2020, the currency has struggled to recover in a bullish channel from there to a December 2019 high of 0.7031, creating a head and shoulders pattern and a lower-low today below the neckline to 0.6842 in the wake of highly expected RBA meeting.

According to Monday's statement, the RBA Board is ready to deliver a rate cut further if needed to support maintainable growth in the economy, full employment, and the achievement of the medium-term inflation target over time.

On the other hand, the US and Chinese trade deal seem to supports economic growth prospects in the near term, after the bushfires and probabilities of a disappointment in this week's jobs data. The unemployment rate will be significant to watch because this data could influence the Aussie, and as we know, the currency already flashing red.

AUD/USD - Technical Levels 

AUD/USD - Daily Trade Sentiment

The AUD/USD is trading at 0.6865 after testing the strong support level of 0.6850. Closing of AUD/USD candles above this level can extend buying until 0.6880, while bearish breakout of 0.6850 can lead AUD/USD prices towards 0.6800 today. 

Day trading sentiment in AUD/USD remained neutral initially, with a focus on 0.6849 support. The outlook is consistent that rebound from 0.6850 could have achieved with three waves up to 0.7031. Consider staying bullish above 0.6850 today. 

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