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The Loonie trades flat this morning due to the lack of local data.

Isaac Figueroa

The Loonie is trading flat this morning, as it is a holiday and there are no major data releases. Recent data numbers have been mixed in Canada. The economy created 66.8 thousand jobs in January, much better than the expected 6.5 thousand. However, manufacturing sales has recorded declines of 1.3 percent in December and 1.4 in November.

Technically speaking, despite that the long-term chart of the USD/CAD is up, this trend is looking exhausted. What will make the direction of the USD/CAD even trickier to see over the next few days is the fact that crude oil prices continue going higher in a strong way, which might push the USD/CAD lower.

The key levels to watch today are the 1.33 handle as a resistance and the 1.32 handle as a support.

The US dollar index fell 0.22 percent and the EUR/USD pair increased 0.28 percent this morning on the President’s Day holiday. A slew of recent US data has not helped support the Greenback recently, especially because of a slight moderation in US rate hike expectations from the Fed. Additionally, the continuing dovish comments from the European Central Bank officials should have weighed on the Euro, but they have not. (The Euro is the main component of the US dollar index).

What should we watch for this week? US-China trade talks continued in Washington. A focus of this week will be how willing the US and China ultimately prove to be in getting a trade deal done before the March 1st deadline before the temporary truce passes.

Last week saw the release of GDP data from the Eurozone with the bloc showing 0.2 percent growth for Q4 2018, which matched the performance of Q3. The main talking point however was that Germany was seen to have avoided a recession by the narrowest of margins with the latest data showing a flat reading for its Q4 GDP. In Germany, after Q3’s -0.2 percent another negative figure would have constituted a technical recession, so it was a very close call. The Eurozone continues to be weighed down by the US-China trade deadlock and the potential for a no-deal Brexit. It seems European Central Bank chief, Mario Draghi, may well depart from his role in November without ever having raised interest rates.

The EUR/USD pair is trading at 1.1326 this morning, and technically speaking it is at a resistance in the short term. However, it is forming a long-term support above 1.1250, which is positive for the EUR/USD pair.

The GBP/USD pair is trading at 1.2916, representing a 0.25 percent increase. It continues to be weighed on by Brexit uncertainty as we draw ever closer to the UK’s departure from the EU.

UK Prime Minister, Theresa May, is due to start another diplomatic offensive this week with the aim of trying to convince EU leaders the only way to avoid a no-deal scenario is for some concessions with regards to the Irish border backstop. It’s a crunch week for May as it looks like next week could see parliament take over negotiations if the deadlock continues. Parliament is due to vote on the 27th of February on a proposal that would give the house more control over the whole Brexit process, which could mean the end of May’s proposed deal and would also very likely lead to a request to the extension of Article 50 from the UK.

The one set of data of note this week from the UK is tomorrow’s wage growth numbers, with an annualized uptick of 3.5 percent expected.

Risk on trade is lifting the commodity currencies this morning with the AUD/USD rising to an intraday high of 0.7160 at the time of writing. There is plenty due domestically from Australia this week with tonight seeing the publication of the latest minutes from the Reserve Bank of Australia’s last policy meeting. Tomorrow night sees wage growth numbers and Wednesday night brings employment figures. We also have RBA Governor, Philip Lowe, speaking to MPs on Thursday night.

Technically speaking, the AUS/USD is still trading in a long-term downtrend; however, there are some signs of exhaustion, which might reverse in the following days or weeks if the right fundamental catalysts happen for the Aussie dollar.

The Kiwi is trading higher this morning as risk-on trade benefits the NZD/USD pair. This week’s main event is the policy decision from the Reserve Bank of New Zealand with a hold on interest rates, which was all but guaranteed from the bank on Wednesday night. As usual, the comments from RBNZ Governor Adrian Orr will be the main area of focus.

The NZD/USD pair is trading at 0.6874 this morning, and, technically speaking, it looks better than the AUD/USD, because it is supported by better fundamentals shown in the latest releases. A long-term resistance is between 0.6925 and 0.6941, where it traded in January this year.