Fundamental & Technical FX Preview for December 2017

Fundamental & Technical FX Preview explained by professional Forex trading experts the “Fundamental & Technical FX Preview” FX trading team.

Fundamental & Technical FX Preview

The minor uptick in Australia’s 3Q Wage Price Index (WPI) is like to keep the RBA on the sidelines as ‘growth in housing debt has been outpacing the slow growth in household income for some time,’ and it seems as though the central bank is in no rush to start normalizing monetary policy as officials are ‘prepared to be patient.’ With that said, the RBA may continue to tame expectations for an imminent rate-hike, but the recent comments from Governor Lowe suggest that the board will switch gears in 2018 as the central bank head senses ‘wage growth has stabilized at a low level and it’s not going to fall further.’

As a result, the lack of urgency to normalize monetary policy keeps the broader outlook for AUD/USD tilted to the downside, but the pair may stage a larger correction over the coming days as the RBA prepares to move away from the record-low cash rate.

A critical support barrier at 7476 represents the bullish invalidation level for the broader uptrend off the 2016 lows. A break below this threshold would shift the focus back towards 2017 open at 7200. That said, the immediate short-bias is at risk while above this mark with a breach / close back above 7730 needed to alleviate further downside pressure.
Bottom line: We’ll be looking to fade weakness while above this key support confluence with a breach above the November range highs needed to get things going.

Even though the Bank of Canada (BoC) appears to be on course to keep the benchmark interest rate on hold in December, the central bank may continue to normalize monetary policy over the coming months as officials project‘inflation will rise to 2 per cent in the second half of 2018.’
After delivering two rate hikes in 2017, the BoC appears to be in no rush to implement higher borrowing-costs as ‘wage and other data indicate that there is still slack in the labour market.’ In turn, Governor Stephen Poloz and Co. may reiterate that the ‘Governing Council will be cautious in making future adjustments to the policy rate,’ but the central bank may unveil a more detailing hiking-cycle in 2018 as ‘less monetary policy stimulus will likely be required over time.’

With that said, the BoC may sound more hawkish over the coming months, and the transition in the policy outlook may continue to foster a broader shift in USD/CAD behavior as ‘the Bank estimates that the economy is operating close to its potential.’

Fundamental & Technical FX Preview Conclusion

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