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Market Wrap
UK Prime Minister Boris Johnson has just announced that we should all work from home, if possible, as of Monday and that the government will be moving to COVID-19 Plan B. If there is evidence that the booster shots can curtail the effects of the Omicron variant, then they will reassess what to do next, but he would encourage everyone eligible to get a booster.
The Bank of Canada (BOC) kept their rates on hold as expected. In their statement, they said that they remain committed to holding the policy interest rate at the lower bound until economic slack is absorbed. In their view, this would get the economy back to sustainable growth and make their stable 2% inflation target achievable. The BOC view the current levels of inflation as persisting into 2022 but expect to see inflation levels ease from H2 2022.
Omicron has thrown a spanner in the works for all the central banks as governments are having to re-impose travel restrictions and deny economic activity beyond the home. Not only does that restrict the movement of goods and create bottlenecks as we have seen over the last 2 years but also a lack of demand for oil. For Canada, this will have a negative impact on their economy due to the relationship between GDP and oil price.
The ActivTrader sentiment indicator shows that 73% of traders are bullish the USDCAD as it slips this week to around from 1.2650 from the recent 1.2850 highs.
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The Loonie is trading within a large rising channel which one would expect to break to the downside eventually. A lot will depend on how well oil prices hold up as government’s start to impose more draconian measures to try and stop the spread of Omicron.
President Biden tweeted that the new data from Pfizer was encouraging and called on anyone who is eligible to get a booster today.
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The demand for oil in North America hasn’t yet completely disappeared according to the weekly US EIA report, though gasoline stocks are higher than expected but below last week’s figure. Weekly distillates which will include Diesel show a build, so maybe haulage is showing a lack of demand. Crude stocks are down -0.240 million barrels and missed expectations of a draw of -1.705 million barrels. Brent oil is slowly moving higher into a level that had previously acted as support and resistance in the past.
The forex heatmap is completely mixed at the London close though the euro and Aussie have retained their relative strength all day. The US dollar hasn’t found any bids after the US JOLTS jobs openings increased to 11.033milion to create a record high number of openings. Over the 12 months ending in October 2021, hires totalled 73.8 million and separations totalled 68.1 million, yielding a net employment gain of 5.7 million. These totals include workers who may have been hired and separated more than once during the year.
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The DXY is finally moving but is still within the trading range set on the last day of November. A breach of $95.50 would open up the probabilities of a revisit to the $94.50 to $93.50 zone.
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The Aussie has gotten itself back above some significant levels of prior support that so far failed to act as significant resistance. This move has been accelerated by the downfall of the greenback today and with little market structure above to stop it, the AUDUSD could be testing the 0.7300 level soon.
