The Bank of Canada has indicated that it needs a more flexible, data-dependent monetary policy in the times to come, according to remarks yesterday from the bank’s head; Steven Poloz. Poloz stressed that they wouldn’t be thinking about interest rates mechanically, but rather that their outlook will depend on a number of statistical economic factors such as inflation, wage growth, business investment, consumer spending and debt, and so on. The Bank of Canada has hiked interest rates twice this year; once on the 12^th of July when rates went up from 0.50% to 0.75%, and again on the 6^th of September when they went up to 1.00%.

It’s important to note that the head of the Canadian regulator expects economic growth to slow down in the second half of the year compared to the first (Canada’s GDP growth in the second quarter reached 4.5% year on year), so there’s no guarantee of another rate hike from the BoC in the near future. Experts from the Canadian commercial bank Scotiabank expect one more rate hike this year followed by another two in 2018.

Yesterday, the Reserve Bank of New Zealand’s meeting on monetary policy concluded with the bank’s official cash rate being maintained at its current level of 1.75%; as was expected. An official statement from the regulator said that economic growth in the country would remain stable in the near future thanks to a loose monetary policy, increased migration to the country, increased exports, and fiscal stimulus measures passed in 2017. Still, the RBNZ continues to believe that the Kiwi dollar is overvalued.

Day’s news (GMT+3):

• 09:00 Germany: Gfk consumer confidence survey (Oct).
• 09:35 Japan: BoJ governor Kuroda’s speech.
• 15:30 USA: goods trade balance (Aug).
• 16:30 USA: GDP annualised (Q2).
• 17:15 USA: Fed’s Stanley Fischer speech.

Finalised GDP figures for the US in the second quarter of 2017 are due to be published today. As far as I can see, this data has already been factored in by the market and won’t be a trend-setter for the dollar. In the short term, however, its publication could create some volatility on currency markets.

EUR/USD

On the 4-hour timeframe (H4), the EURUSD pair is testing the key base of the upwards trend:

On the 30-minute timeframe (M30), the EURUSD pair has broken through the resistance line of the downwards trend:

At the moment, I can’t see any buy or sell signals. At the time of writing, the EURUSD pair is trading at 1.1743.

GBP/USD

On the hourly timeframe (H1), the GBPUSD pair is attempting a breakout of the range:

On the 30-minute (M30) timeframe, the pair is continuing to move in a downwards trend:

Although it’s possible that, in the event that the trend line gets tested and the downwards trend reaffirmed; a very weak sell signal could appear, I’m going to hold off on opening a positions for now.

At the time of writing, the GBPUSD pair is trading at 1.3385.

One of my reasons for not trading on the GBPUSD pair for now is that I currently have long positions open on the USDCHF and USDJPY pairs, as well as a short position on gold. For the sake of diversity, I don’t want to have a lot of open positions favouring the dollar on various currency pairs.

USD/CHF

The USDCHF pair’s long term growth prospects have increased. On the daily timeframe (D1), yesterday’s candlestick closed above the upper line of the downwards trend:

We can clearly see on the chart that yesterday marked the first real breakout attempt of the trend line. So, I’m keeping my long position on the USDCHF pair open with a Stop Loss at 0.9390 and Take Profit at 0.9940 – 0.9960.

At the time of writing, the USDCHF pair is trading at 0.9751.