As the Bank of Canada prepares to announce its decision this week, analysts predict a potential boost for the Canadian Dollar, though the currency's recent underperformance raises questions about the sustainability of any upward trend. The GBPCAD exchange rate, despite a recent setback, still holds within its upward channel, supported by technical indicators and market dynamics. Meanwhile, the USDCAD faces downward pressure as the Commonwealth Bank suggests a bearish outlook. This article delves into the technical analysis of GBPCAD, assesses the potential impact of the Bank of Canada's decision on the currency market, and explores the broader economic factors influencing the Canadian Dollar's trajectory.

The Canadian Dollar is poised for a pivotal week as the Bank of Canada gears up for its midweek policy announcement. While analysts anticipate some support for the currency, concerns linger about the sustainability of any strength, given the recent underperformance relative to its G10 counterparts.

Despite a 0.78% dip against the Pound last week, the GBPCAD exchange rate continues to maintain its upward channel. Technical analysis reveals a resilient trend, with near-term support found at the 78.6% Fibonacci level. Analysts suggest the potential for a recovery, setting the stage for a test of the multi-month high at 1.7323. A breach of this level could propel Pound Sterling to levels unseen against the Canadian Dollar since 2021.

Commonwealth Bank projections indicate a bearish outlook for the USDCAD, influenced by broader economic factors. The correlation between the Canadian Dollar and U.S. data suggests potential weakness, with expectations of a softening hawkish tone from the Bank of Canada further impacting the exchange rate.

As the Bank of Canada is widely expected to maintain its overnight policy rate, analysts are vigilant for any shifts in the central bank's tightening bias. Signs of economic weakening pose a risk to the Canadian Dollar, and a toned-down approach by the BoC could elevate the USD/CAD pair. Market pricing reflects anticipation of a softer stance, with potential impacts on the CAD swap curve.

Technical analysis reveals that GBPCAD remains within an ascending channel for over two months. Current movements near the support zone, aligned with the lower line of the channel and the 61.8% Fibonacci zone, signal a completion of a correction phase. I  anticipate a resurgence towards the resistance zone (1.738 -1.728) to complete the main wave, highlighting the potential for continued uptrend resilience.

As the Canadian Dollar stands at a crossroads, the Bank of Canada's decision holds significant implications for currency markets. The technical analysis of GBPCAD suggests a resilient uptrend, though economic uncertainties loom large. Traders and investors are advised to tread cautiously in the wake of the BoC decision, recognizing the interplay between economic data, central bank decisions, and technical indicators shaping the trajectory of the Canadian Dollar in the weeks ahead.

ENTRY PRICE : 1.71200

STOP LOSS : 1.70400

TAKE PROFIT : 1.738

EXP : 19/12/23

The EURUSD still faces continued downward pressure, causing it to hover around the 1.0820 range on Tuesday, which also coincides with the key 200-day SMA.

On the other hand, the U.S. Dollar Index (USDX) strengthened slightly around 103.70, contributing to a positive start to the week. The sharp rise in the USDX is noteworthy, especially given the small retracements in U.S. Treasury Securities yields across maturities.

On the broader economic background, the current monetary policy stance remains unchanged, and investors are considering that the Federal Reserve and the European Central Bank (ECB) may cut interest rates in the spring of 2024.

Within domestic data, the final November services PMIs for Germany and the eurozone as a whole exceeded their preliminary values of 49.6 and 48.7, respectively.

Looking at individual Member States, the aggregate PMI results were mixed. Ireland posted a three-month high of 52.3, while Spain hit a three-month low of 49.8. Italy posted a two-month high of 48.1 and Germany a four-month high of 47.8. The French PMI remained unchanged at a stable 44.6.

Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said that "the services sector continued to decline in November." He noted that the modest improvement in the activity index did not provide much optimism for the recent rapid economic recovery, and he highlighted several worrying trends, such as the fifth consecutive monthly decline in new business and subdued business expectations, which remain "well below the long-term average."

According to our GDP forecasts, the economic outlook for the eurozone is not optimistic, as inferred from the latest PMI indicators. GDP is likely to fall in the fourth quarter. If two consecutive quarters of negative growth are defined as a recession, then the eurozone is currently on the "brink" of falling into recession.

ECB Executive Board member Schnabel said in an interview, that given the "significant" decline in inflation, the ECB can cancel plans for further interest rate hikes, and policymakers should not guide interest rates to remain stable in the middle of 2024.

Schnabel's remarks marked a dovish shift in her position. In the past year and a half, she pushed the largest interest rate hike in the history of the ECB. Just a month ago, Schnabel insisted that raising interest rates was still an option because the last mile of fighting inflation might be the hardest. Schnabel also warned that given the rapidly changing inflation data, policymakers will be surprised when inflation falls, just like when inflation rises. Schnabel also warned against guiding markets on interest rate moves too far ahead. Schnabel is the first ECB policy hawk to express a change of opinion.

The EURUSD's downward pattern from the 1.1016 level is still in progress and the intraday bias remains to the downside. The next target is the 55-day SMA (currently at 1.0770). A sustained break below this level would test 1.0668 support.

On the upside, a break above 1.0912 secondary resistance would turn the EURUSD neutral again. A further break above the 1.1016 level would resume the uptrend from the 1.0447 level and retest the 1.1274 high.

The momentum indicator suggests that the upside is losing momentum, reflecting the recent weakness in the market. The Relative Strength Index has shifted to the positive zone, while the Stochastic Oscillator has a bearish cross in overbought territory, suggesting that the decline will continue. However, the MACD has flattened around the zero level, reflecting a neutral outlook for the EURUSD.

Overall, the long-term outlook remains neutral. A decisive break above the 1.1275 level is needed to bring the positive outlook back into play. On the other hand, a break below the 1.0668 level could change the bias to bearish. For short-term trading, because it is still in the downward death cross structure in the 1D timeframe, it is recommended to go short at the highs.

Trading direction: Short

Entry price: 1.0845

Target price: 1.0668

Stop loss: 1.0982

Deadline: 2023-12-18 23:55:00

Support: 1.0807, 1.0767, 1.0700

Resistance: 1.0848, 1.0913, 1.0965

After the weekend, on Monday, due to the low liquidity in the Asian market, the price of gold hit an all-time high of about US$2,147 per ounce. Judging from the movements, the soaring gold price looks more like driven by the market imbalance caused by the sellers' stop-loss orders being triggered rather than finding a stable balance between supply and demand, because the price continues to fall after recording a long upper shadow.

It fell to US$2,060 in the European session and US$2,030 in the New York session. In less than a day, gold prices fluctuated by US$128, leaving Monday's close further away from record highs than Friday's close. Essentially, it's the change in market sentiment leading to a bearish engulfing pattern.

Bearish factors in the gold market at the start of the week also included a strong rise in the U.S. Dollar Index (USDX), a rise in U.S. Treasury Securities yields, and weaker crude oil prices. However, gold prices remained supported by an overall bullish technical structure, continued safe-haven demand, and expectations that major global central banks will exit the tight monetary policy.

Looking at this week, the focus will also be on the U.S. Non-Farm Payrolls data. The data will provide investors with more clues about the next steps in the Fed's monetary policy. If the job market data is upbeat and shows that the labor market remains tight, it could challenge the current market sentiment and trigger new divergences, and then the USDX could start to gain momentum, which would limit the upside for gold prices and trigger another pullback. If the job market data comes in below or in line with expectations, it will still reinforce the view that the Fed has ended its rate hikes and could further push gold prices to rebound.

Gold prices have been in a sharp uptrend since November 10 when gold bounced off the key 200-day SMA. On Monday, gold hit a new all-time high of US$2,147 in a tight liquidity environment before retracing all intraday gains as prices fell back below the previous all-time high of US$2,082.

Given that momentum indicators are starting to ease from the overbought conditions, gold prices could see a further correction. The first target for a pullback is close to the previous starting point of US$2,016. Below that bottom line, prices could challenge the 61.8% Fibonacci level at US$1,976. Even lower, the 50.0% Fibonacci level at US$1,943 could provide downside protection.

On the other hand, the April peak of US$2,082 could be the first line of resistance if bulls try to push prices higher. A break above this resistance could lead to another test of the psychological threshold of US$2,100. If the bulls don't stay here, prices could re-touch the US$2,135 level, the resistance line of all-time highs.

Overall, the gold price yesterday soared and fell back, recording a long upper shadow, and strengthening the bearish pressure of the market. Coupled with the indicator signal turning weak, it suggests that the trend will be biased towards falling back; however, the market has recently recorded a golden cross between the 50-day SMA and 200-day SMA, which is conducive to the gold price moving upward. The target range is US$2,070-$2,082. It is recommended to buy low and sell high.

Trading direction: Long

Entry price: 2016, 2009, 2001

Target price: 2080

Stop loss: 1986

Deadline: 2023-12-19 23:55:00

Support: 2016, 2009, 2007, 2001

Resistance: 2033, 2042, 2052, 2075

Last week, OPEC+ countries, led by Saudi Arabia, collectively decided to drastically cut oil production by around 2.2 million barrels per day early next year. Oil prices, however, moved to the downside as the market was disappointed with the scale of the cuts and skeptical of further cuts in the future.

Saudi Arabia Energy Minister Abdulaziz bin Salman said OPEC+ oil production cuts could "absolutely" continue beyond the first quarter if needed. He said the cut of more than 2 million barrels per day announced last week, about half of which came from Saudi Arabia, would only be canceled after taking into account the market situation and would be phased out gradually.

WTI crude oil price is still lower than that before the OPEC+ meeting. Market observers pointed out that only about half of the production cuts were brand new, and questioned whether the promised production cuts would actually be fulfilled, so oil prices lacked new momentum. The Saudi Arabia Energy Minister's speech once drove the oil price to rise to US$74.18 in intraday trading on Monday, but the decline of WTI crude oil expanded to the bottom of the range of US$73.00, with a decrease of 0.7%.

On Tuesday, WTI crude oil continued to hover at the bottom of its range with no direction. If the commodity does not break below yesterday's new lows during the day, a bottoming structure within the range is expected.

WTI crude oil may get directional clues from the inventory data of the American Petroleum Institute and Energy Information Administration, and the increase in inventory may keep investors alert to the weak demand situation. After all, inflation is still high and growth is slowing down, which means that the energy demand is slowing down.

Top U.S. data releases this week could also influence risk sentiment and energy price action. An increase in employment data could affect the Fed's tightening expectations, although the Federal Open Market Committee has reiterated that they plan to keep policy unchanged for the time being.

Strong employment data may rekindle the hope of raising interest rates, which may be favorable for safe-haven USD and negative for crude oil & other commodities.

On the other hand, the weak employment data will once again confirm the Fed's plan of staying put, and may even stimulate the interest rate cut negotiations at the beginning of next year, which will lead to losses of the USD with lower yield and risk preference capital flow.

WTI crude oil has been consolidating for close to a month between support around US$72.34 and resistance near US$79.67. Prices are currently testing support and could rebound to the top again.

Stochastic is falling but is approaching the oversold zone, suggesting that the bears are exhausted. A recovery means that the bulls are ready to take over. However, the Relative Strength Index still has more room to fall before indicating oversold conditions; therefore, bearish momentum is likely to continue.

Moreover, a break below support could trigger a drop of the same height as the range or around US$6. The 100 SMA appears to be falling below the 200 SMA, suggesting that the path of least resistance is to the downside. At the same time, crude oil is trading below both SMAs; therefore, these SMAs may remain at dynamic resistance levels. A bounce-off from the support level could still touch the upper limit of these technical indicators, which is around US$76 per barrel. It is recommended to buy low and sell high.

Trading direction: Short

Entry price: 73.30

Target price: 68.69

Stop loss: 76.50

Deadline: 2023-12-18 23:55:00

Support: 73.00, 72.37, 71.18

Resistance: 73.84, 75.07, 76.79

During Tuesday's (December 5th) Asian session, WTI crude oil oscillated slightly, and it is currently trading at 73.5 dollars/bbl. Yesterday, oil prices fell from highs, and they depreciated for 3 days by 7 dollars after the production cuts. This situation was like the production cuts in June, as the oil price did not rebound in early June when OPEC+ announced that production cuts would start in July. Oil prices started to grow at the end of June after several attempts to touch the bottom. Now, the bearish momentum has been released, and the depreciation slows down as it's time to take profits. The wash trading is easing, and the price is building the bottom. When there are enough bullish supports, WTI crude oil will rebound. Yesterday, the market saw supportive factors. Firstly, the U.S. Department of Energy officials stressed buying back oil reserves as much as possible, which also shows that the U.S. accepts the current price. Secondly, Saudi Arabia emphasized that the 2.2 million bpd of production cuts will be implemented. If necessary, OPEC+ oil production cuts can "absolutely" continue through the end of the first quarter, which is an obvious warning to shorts. If oil prices keep declining, the production cuts will be extended, indicating the determination to keep the oil price stable. Moreover, the current market has been trading the first U.S. interest rate cut in March of next year, and perhaps the fundamentals start to support the oil bulls. For investors, it is significant to shift to buy at lows. Many investors know the right direction but don't have strong execution ability, which means a lack of faith. Therefore, investors should establish an effective trading system, start to implement the plan with small positions, and avoid any subjective actions.

News: U.S. Deputy Secretary of Energy: We will buy back as many oil reserves as possible. The U.S. will take advantage of low oil prices to replenish its reserves, which are limited due to physical constraints. Saudi Energy Minister Abdulaziz said that 2.2 million bpd of production cuts will be delivered," adding that he believes the 2.2 million bpd cuts could even overcome the inventory build-up that usually occurs in the first quarter. He also demonstrated that OPEC+ oil production cuts could "absolutely" continue beyond the first quarter if needed.

Today's focus: U.S. November ISM non-manufacturing PMI, October JOLTS job openings, and API crude oil inventory data. For this week, investors should focus on the Nonfarm Payrolls and the ADP data.

Oil prices rebounded slightly yesterday and reached 74.8. Then, it depreciated and closed the daily chart lower. However, the depreciation yesterday weakened as oil dropped to 72.7 and stayed above the first support level of 72.5. Technically, the running range is unchanged and oil price is oscillating in the center of the channel. If the oil bears take the lead, the oil will keep descending to the lower area of the channel to find support. On the contrary, it may rebound to test the resistance of the upper area. This pattern will maintain until the end of this month, or before 2024. Today, the trading range will start from 72.5 to 75.5, and aggressive investors should buy low and sell high with more effort to buy at lows.  

Trading direction: Long

Entry price: 72.500

Target price: 75.500

Stop loss: 72.000

Support: 72.500/67.000

Resistance: 75.500/79.500

During the Asian session on Tuesday (December 5), spot gold fluctuated upwards slightly and is currently trading around ￥2037. Yesterday's gold movement was a dramatic surprise. It surged by $75 to a record high of $2145 in the morning session, and then plunged by $120 to as low as $2020! What happened? In part, it was driven by expectations. The spike was propelled by the rate-cut bets early next year, despite the hawkish expectation management, but the biggest factor was the stop-loss orders being triggered. The plunge was due to the adjustment of the optimistic rate-cut expectations and the profit-taking. With the Fed officials' expectation management, Morgan Stanley, Goldman Sachs, and Bank of America are trying to cool down the market. Currently, the market has lowered the probability of the first Fed rate cut next March. Gold prices are back to levels seen last Thursday. The price is unchanged, but the money is gone, and this may be the voice of many investors. The market's strong hands always make excessive expectations, which is also a means of washing trade. Yesterday, we said the market was too optimistic about next year's rate cuts and ignored the Fed's expectation management. We also expected an intraday pullback and recommended investors go short at high levels. That's what we're going to do. Don't worry too much about the news flying all over the world, but focus on the market. If you bet wrongly, you will pay the minimum cost, and if you are right, you will make considerable profits. Of course, this will test our ability to hold positions, which is accumulated over time. You cannot make it with subjectivity, so start to trade with a plan! For the short-term trend of gold prices, I think that the market's overly optimistic expectations will be adjusted, so gold prices will pull back soon and trading should also be based on a correction.

Data: US factory orders fell 3.6% MoM in October, which is the lowest since April 2020, compared with the expected decline of 2.6% and the revised increase of 2.3% from the 2.8% increase in the previous month. The Eurozone Sentix investor confidence index in December was -16.8, compared with the expected -16.4 and the previous value of -18.6.  

Institutions: Following JPMorgan and Bank of America, Goldman Sachs also issued a warning: the market is overpredicting that the Fed will cut interest rates, and Goldman Sachs expects to cut interest rates by only 25 bps next year.  

Today, investors need to pay attention to the US ISM non-manufacturing PMI for November and the JOLTS job openings for October. This week's focus is on the non-farm payrolls and ADP data.  

Yesterday, gold prices saw an inverted deep V-shape reversal. Gold prices surged sharply higher in morning trading, hitting an all-time high of 2145. Subsequently, they fluctuated downwards, stopped falling around 2020, and finally closed with a full bear candle with a long upper shadow. At this point, the gold price trend has also shown signs of a top, forming a bearish piercing pattern. At the same time, the signs of bearish divergence have not changed. The MACD indicator on the daily chart is in the overbought area and tends to form a death cross. But judging from the hourly chart, after yesterday's plunge, the MACD indicator has entered the oversold area and has formed a golden cross. During the day, gold prices may rebound at the hourly level, and the specific strength of the rebound depends on the momentum. Investors could temporarily expect a slight rebound in the Asian session, and strong resistance is in the 2050 area where we can enter short positions. The first support level is around $2020, and further support is at $2010. The reference trading range today is 2010-2050, and it is recommended to buy low and sell high and pay attention to controlling losses.

Trading Direction: Long

Entry Price: 2010

Target Price: 2050

Stop Loss: 2005

Support: 2020.000/2010.000

Resistance: 2050.000/2065.000