Currency markets were unnaturally calm during trading on Tuesday with major currency pairs lacking direction as anxious traders awaited the next big macro release. Stock markets meandered between losses and gains as the conflicting combination of rising oil prices and heightened expectations of a U.S. interest rate kept investors on edge.
Looking at the Euro/U.S. Dollar currency pair we see price trapped in a big consolidation pattern, a triangle that seems to be over as of recent bearish price movement. It's a five-wave correction, a continuation pattern that can after its completion push price lower into a strong decline.
The Canadian dollar has been among the weakest of currencies in G10 in recent days. The sell-off has been sparked by the Bank of Canada’s Governor, Stephen Poloz, who on Wednesday said the central bank “actively” discussed the prospects of adding more stimulus into the economy, but in the end decided to keep rates unchanged.
The U.S. dollar advanced against most majors with the Canadian and Australian dollars the outliers as commodity prices continue to rally after the OPEC production cut deal was announced. Chinese data is once again in the spotlight with the release of its real gross domestic product (GDP) and industrial production on Tuesday, Oct. 18 at 10:00 pm EDT.
A stable but lackluster economic outlook will push the European Central Bank to tweak its asset purchase program and announce an extension by year-end, although economists polled by Reuters said a move was unlikely next week.
The USD was mixed against majors. The U.S. dollar appreciated against the JPY and the CHF but traded lower versus commodity currencies and the EUR and the GBP after a surprise Organization of the OPEC supply cut agreement and signs of a settlement between the U.S. Department of Justice and Deutsche Bank.
Sterling slumped to a three-year low against the euro on Monday as Britain set a March deadline to start divorce proceedings from the European Union, while worries over Deutsche Bank and Europe's banking sector kept share prices in check.