USD / CAD, Wall Street, AU GDP, Oil – Talking Points
- US stocks fall to extend Monday’s rally despite moderating Treasury yields
- Australia’s fourth quarter gross domestic product at the center of APAC negotiations
- USD / CAD aim lower, but fall crude oil price can reduce the strength of the Loonie
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U.S. stock indices retreated on Tuesday after Monday’s sharp rise, signaling that Wall Street may have gotten a little ahead of the curve earlier this week. The S&P 500 lost 0.81% while the Dow Jones Industrial Average fell 0.63%. Technology and small cap stocks were the biggest losers, Nasdaq Composite and Russell 2000 lost 1.69% and 1.93% respectively.
Elsewhere, the DXY The index sees its recent momentum wane as the US dollar weakened against its main competitors. Closely watched Treasuries yields have also continued to decline after the 10-year rate eclipsed 1.50% last week, its highest value since the start of the pandemic. The rally in bond markets was not enough to instill confidence in equities, however.
The volatility of Treasuries caught investors off guard after months of enthusiasm amid a strong economic recovery. Central bankers are now also expressing unease. In a speech to the Council on Foreign Relations, Federal Reserve Governor Lael Brainard expressed concern on Tuesday, saying: “I am very attentive to developments in the market.”
Nasdaq US 10 Year Yield VIX 15 Minute Chart
Chart created with TradingView
Wednesday’s Asia-Pacific Outlook
APAC markets may open slightly to the upside today after a tilt in the risk reduction that saw major indices drop on Tuesday. Hong Kong’s Hang Seng Index and mainland China’s Shanghai Composite Index both fell 1.21%. Japan Nikkei 225 suffered a loss of 0.86% as Australia ASX 200 pushed 0.40% lower. Despite the collapse of the equity markets, risk sensitivity Australian dollar won against the greenback.
Speaking of the Aussie-Dollar, Australia is set to release gross domestic product figures for the fourth quarter. According to DailyFX Economic Calendar, GDP growth on a quarterly basis is expected to cross paths at 2.5%. While this represents a decline from the previous quarter, economists remain impressed with the resilience seen in the Australian economy.
The merchandise Canadian dollar took advantage of the USD weakness despite falling crude oil prices, with USD / CAD falling 0.10%. A larger drop in oil prices could, however, impact the Canadian dollar. Tomorrow may give some direction to the price from the EIA’s weekly report when the US agency releases inventory figures on petroleum products.
Canadian dollar technical outlook
The Canadian dollar has performed well against the US dollar this month, so far. USD / CAD is approaching 12 days Exponential moving average after a move lower saw support at the 38.2% Fibonacci retracement of the January-February move. The Relative Strength Index (RSI) is positioned neutral, but the MACD indicator is breaking lower towards its centerline, indicating a possible resumption of downward momentum.
USD / CAD 4 Hour Chart
Chart created with TradingView
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— Written by Thomas Westwater, Analyst for DailyFX.com
Contact Thomas, use the comments section below or @FxWestwateron Twitter