Impressive round-trip movement of the USD during the Asian session.
The Steve Bannon subpoena by Attorney General Mueller and the fears of a possible "shutdown" due to the lack of agreement of the American Congress, caused a new wave of sales of the USD that has led to mark new highs in the EURUSD at 1.2323 and lows in USDJPY at 110.20, a move that has been quickly corrected to return to the levels of yesterday's session.
The psychological barrier of 110 in the USDJPY has served as support especially after the statements of the Japanese government showing some concern for the appreciation of the JPY
It seems that the upward movement in the European currency begins not to satisfy the ECB that is coming to the fore in different ways in recent days trying to relax expectations. According to sources from the monetary authority, they do not plan to modify the "forward guidance" at the next week meeting. In addition, french Villeroy commented that the strength of the currency is a factor to be taken into account in order to achieve the inflation target. On the other hand, Weidmann said in an interview that a rise in mid-2019 could be appropriate (compared with the expectations that are at the beginning of 2019) and Constancio this morning has stressed that it is still far from achieving the inflation targets of the 2%.
Therefore, we recommend caution after the rally seen at the start and end of last year in the single currency, which could have overreacted with a clear divergence in monetary policy between Europe and the US, with a EUR long positioning at hisorial highs, that could lead investors to take profit.
The Central Bank of Canada meeting will be carefully watched today. The market discounted today`s rise with an 85% probability and another three additional ones until the end of the year, which would make it the more "hawkish" Central Bank. We could find today an upward movement in rates but a "dovish" message for the market to reduce its expectations, which will cause a strong impact on the CAD that against the USD that has left more than 3% in the last month.
Take profit in short USDJPY at 110.25 opened at 112.90
Long USDCAD at 1.2435 - TP 1.2750 - SL 1.2350
Note: This analysis is a personal opinion based on my experience, not a professional signal service. For trading, you must base your decisions on your own criteria
