Macroeconomic overview

The CAD hit its weakest close in more than two weeks against a broadly higher USD after hawkish speech from Fed’s Harker. The CAD was also hurt by falling oil prices and concern about some details of a trade surplus report weighing.

The CAD suffered as investors reassessed the prospect of a faster pace to U.S. interest rate hikes after Philadelphia Federal Reserve Bank President Patrick Harker said late on Monday he would be open to raising rates at the central bank’s March meeting if growth in jobs and wages continues.

On the other hand, Minneapolis Fed President Kashkari released a dovish statement explaining the rationale behind his vote to leave adminstered interest rates unchanged at the FOMC’s January 31 – February 1 meeting. He said he sees no immediate risks to financial stability owing to rising asset prices and the U.S economy may not have reached full employment yet, both dovish assertions.

Kashkari said he believes there is more slack in the U.S. labor market today than before the financial crisis and that he sees no signs of labor costs rising in such a way as to put upward pressure on inflation. He downplayed the rise in survey-based and market-based measures of inflation expectations, saying their increase since the presidential election result does not deserve too much weight. Likewise, Kashkari said his economic forecast does not factor expectations of fiscal stimulus or tax and regulatory changes that might promote business activity.

Canada posted a CAD 923 million trade surplus in December, thanks largely to booming crude oil exports. November’s surplus was also revised sharply higher. But while overall exports rose by 0.8% in December, export volumes actually fell by 1.4%.

Technical analysis

Today’s drop of the USD/CAD may suggest that recent corrective move on this pair is over. The pair still has not touched falling December-February trendline, which is the nearest resistance level now.

Trading strategy

The selling signal is not strong enough to revise our current strategy, but we will consider lowering our short-term sell order. Long-term outlook remains bearish.

GOLD: Political uncertainty boosts appetite for gold

Macroeconomic overview

Gold hit a new three-month high today, as political uncertainty in the United States stoked safe-haven demand.

Given the absence of significant data this week, the market’s attention is on politics. Controversy over Trump’s temporary travel ban on people from seven Muslim-majority countries has boosted appetite for bullion as a safe-haven asset.

Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, climbed 1.01% to 826.95 tonnes on Tuesday from Monday. Holdings rose for a fifth straight session. The rise in holdings, along with recent data from U.S. Commodity Futures Trading Commission, show an increase in long positions for managed money and a decrease in short holders.

Technical analysis

7-day and 14-day exponential moving average stay positively aligned and gold is above them. Gold broke resistance level at 1233.00 (November 16 high) and is on the way to 50% fibo of July-December fall near 1250.00 now.

Trading strategy

Our short-term gold position is risk free now, as we have locked in profit at 1210.00. Technical analysis suggests further rise to our target at 1250.00.

TRADING STRATEGIES SUMMARY:

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