The Bank of Canada decides its policy; EUR / CHF, a rebound to be confirmed

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Currency Table-Time Horizon: Daily

Australian dollar and Canadian dollar find favorable winds

The Australian dollar hit its highest level in a week on Wednesday, amid renewed risk appetite, following signs that omicron may be less severe than other variants of Covid-19, but still vulnerable to existing vaccines.

British drugmaker GSK said on Tuesday that its antibody-based Covid-19 treatment with its US partner Vir Biotechnology is effective against all mutations in the novel omicron variant of the coronavirus.

According to RBA Governor Mr. Lowe, “The emergence of the Omicron strain is a new source of uncertainty, but it should not derail the recovery. The economy is expected to return to its pre-Delta course during the first half of 2022. By downplaying Omicron risk, the RBA has fueled expectations of an early rate hike. AUD / USD in six weeks The New Zealand dollar followed the higher Australian dollar.

The good news on Omicron put risky asset markets in a “hot mood”, pushing up stocks, commodities, as well as riskier commodity-linked currencies.

The Bank of Canada will decide its monetary policy today. Investors grabbed the Canadian dollars yesterday ahead of the monetary policy announcement. The Bank of Canada is expected to leave interest rates unchanged, but given the continuing positive data, it will reaffirm its intention to raise interest rates early next year. At its last meeting in October, the BOC surprised the market by abruptly ending quantitative easing and advanced its forecast of a second-half rate hike to the second quarter of 2022. Since then, the economy has continued to grow. recover from previous restrictions. Job growth exceeded estimates in November, as more than 153,000 workers found new jobs. Not only has the labor market returned to its pre-pandemic level, but the economy is at full employment. As today’s IVEY PMI report indicates, manufacturing activity is on the rise and, most importantly, inflation is rising at its fastest pace since 2003.

At this rate, the Bank of Canada can no longer justify the current level of political accommodation. The market is forecasting between 4 and 5 rate hikes by the Bank of Canada next year. In view of the latest figures, it is not excluded that the central bank suggests that rates could be raised sooner.

EUR / CHF: signs of a rebound to be confirmed

Monday’s long bullish candlestick that encompassed several sessions seemed to signal an end of the bearish wave but this was not confirmed by yesterday’s session. The strong downtrend in effect since September is therefore not invalidated as long as prices remain below the 34-period moving average and below 1.0535.

The risk is therefore to see the movement continue towards 1.0234 lower from April 2015.

However, the upward reversal of the RSI may lead to a rebound towards resistance. Only the crossing of this level will give a signal of neutrality on the euro against the Swiss franc.

Evolution of the euro against Swiss franc in daily data:

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