Yellen Is Not Done Speaking

Wednesday’s trading took place in expectation of the speech by Fed chief Janet Yellen and data on the interest rate in Canada and on oil inventories in the United States. All three basic news items turned out to be entirely predictable, although there were still some surprises.

Canada’s Central Bank raised its rate from 0.5% to 0.75%, which strengthened the loonie relative to other currencies. Although analysts’ opinions were split 50/50, it still would have been better for Canada to keep the rate low because of the nature of its economy. Nevertheless, the rate went up and the USD/CAD pair immediately fell to 1.2812. Naturally, the market managed to regain some of this rise before the end of the day and it will continue to do so on Thursday, but now the support is at 1.28 and the resistance at 1.2825, 1.2865, and 1.2895.

The news from the oil industry was also rather curious: after the OPEC report, which was somewhat blurry, the majority of investors waited for data from the International Energy Agency. Preliminary data from the American Petroleum Institute were a little surprising, but the IEA confirmed the data: oil inventories fell even more, to 7.564 million.

Locally this will boost oil in the next few days: at a current cost a little above $47.60, oil might react negatively to the stronger dollar. The support is around $47.25, and there is strong resistance at $48.60.

Yellen’s speech is now prompting far more questions than answers. Because the speech will continue on Thursday, the majority of investors will be looking for new reasons for a possible hike in the Fed’s rate and a tightening of monetary policy. Locally, the dollar is continuing to strengthen Wednesday evening and will apparently strengthen on Thursday as well: the EUR/USD pair is trading at 1.14 after attempts to rise to 1.15.

Yuri Prokudin, Olymp Trade analyst

Olymp Trade Review