US stocks to open lower; CAD looks to recover

Summary:

• US indices in the red ahead of cash open

• Sentiment falls on US-China tensions

• CAD gains after CPI data

This afternoon we’re set for a relatively rare occurrence when the opening bell rings out on Wall Street, with a 3 major US indices trading in the red. The declines are only in the range of 0.2-0.3% but after the recent run-up there is finally some potential signs of interest for bears looking to short. Sentiment seems to have soured a little after the US Senate passed a bill supporting protestors in Hong Kong and even though there have been reports since that this will not damage US-Sino relations at a particularly fragile time, there is a concern that it will have an adverse impact.

The US500 may have peaked in the near term and fib retracements taken from the October low can provide possible profit targets for shorts or areas of interest for longs. The 23.6% comes in at 3067 but it is the 38.2-41.4% region from 3018-3027 that looks most interesting as it also broadly coincides with the prior peaks seen in September. A break above 3132 would pave the way for further upside. Source: xStation 

The economic calendar is relatively light for the US this afternoon with little of note until the FOMC minutes are released at 7PM (GMT). However, there has been a clear reaction to the latest Canadian figures with the CPI data for October released and coming in as follows:

• CPI Y/Y: +1.9% vs +1.9% exp. +1.9% prior

• Median Y/Y: +2.2% vs +2.2% exp. +2.1% prior - revised down from +2.2%  

• Common Y/Y: +1.9% vs +1.9% exp. +1.9% prior

• Trimmed Y/Y: +2.1% vs +2.1% exp. +2.1% prior

Canadian inflation remains tightly hugging the middle of the 1-3% range according to both the headline and core CPI measures. Source: XTB Macrobond 

The immediate market reaction has seen the Loonie move higher, with USDCAD dropping back below the 1.33 level. However, these moves so far pale in comparison to those seen yesterday when there was a sizable depreciation in the Canadian dollar which fell to its lowest level in six weeks after a speech from Deputy BOC Governor Wilking. The address at the Montreal finance group erred on the dovish side with Wilkins stating that there is room for the bank to lower rates if necessary while dropping a fairly strong hint in referring to the BOC sitting on the sidelines with the Fed has cut rates over the past year. 

USDCAD has jumped higher in the past 24 hours although these gains have been pared somewhat after the latest CPI release. Source: xStation