Market Pulse 08.09.2022
Market Pulse 08.09.2022
Bank of Canada (BOC) raised its rate to 3.25%
U.S. dollar index slided to 109.634
Gold rebounded from 1,691 USD
Japanese yen climbed to 144 USD
Brent Oil fell to 87.37 USD
On Wednesday, the Bank of Canada raised rates to 3.25%, the highest level in 14 years. This is the most aggressive tightening campaign in recent decades, and apparently it has not yet been completed, since inflation is too high for the country's economy. The central bank said in a statement that "given the prospects for inflation, the Governing Council still believes that the interest rate will need to be raised further." Further rate increases will depend on business indicators, as the effects of tightening monetary policy affect the economy.
Recently, the U.S. dollar index has been growing rapidly, and after reaching a peak of 110.79, the level of 2002, it has slightly declined to 109.634. However, the dollar is likely to continue to strengthen ahead of an interest rate hike in the United States. Strong economic indicators show that the country's economy is ahead of its competitors. The dollar is considered a safe haven currency, therefore, given the geopolitical risks and the energy crisis in Europe, investors prefer to buy it.
Oil prices dropped sharply to 87.37 USD per barrel. This happened due to the poor trade data in China and a sharp strengthening of the U.S. dollar. In addition, traders are afraid of a recession and a slowdown in demand in Europe. OPEC's decision to slightly cut output did not support the price level desired by the alliance's member countries, so investors will be looking forward to the organization's next steps to strengthen the oil market.
The USDJPY pair jumped to the level of 144.873 due to the strengthening of the US dollar. The price is above the 25 and 50 days moving averages. The wide open Bollinger Bands points to high volatility and suggest a further moving upwards, while the RSI and the Stochastic display a possible correction down towards support level of 142.678.
The GBPUSD pair tested the 1.14130 level amid ongoing concerns about the U.K. economy and the strong U.S. dollar. The pair is still trading below the 25-day and 50-day moving averages, while the Relative Strength Index (RSI) and Stochastic are pointing down. Thus, it is possible that the GBPUSD pair may retest the support level of 1.14130 before recovering to 1.15279 and above.
The XBRUSD price fell to 87.34 U.S. dollars, as traders fear a slowdown in demand. In addition, a strong dollar and rumors about a possible imminent conclusion of an Iranian nuclear deal may become a downside factor for the oil market in the near future. The price has rebounded slightly, but is still well below the 25- and 50-day moving averages. The CCI and RSI indicators are in the oversold zone. If XBRUSD falls below the historical support level of 87.34 USD, we may see a continuation of the downward movement towards 85.43 USD.