News on December 5

Yesterday's tweet by US president Donald Trump renewed fears about reaching the trade deal with China. "We are either going to have a REAL DEAL with China, or no deal at all”, - said Mr. Trump. In case of no deal, the US will charge a huge number of tariffs against Chinese production. It increased the risk aversion across the financial markets in Asia.
During the Asian session, the Australian dollar fell on the release of the weak GDP. The Australian economy grew by 0.3% in the 3^rd quarter, a lower level than the expected 0.6%. The decline happened due to the increased household consumption, driven by spending on food and housing. In addition, the household saving ratio declined to 2.4% in the 3^rdquarter. This is the lowest saving rate since December 2007.

AUD/USD has already tested the support at 0.7285 on the news. The strong USD can make the pair retest this level. If the risk-on sentiment across the equity markets increases due to more certainty in the US-China trade deal, the aussie will rise towards the resistance at 0.7370.

EUR/USD fell as the US Dollar had strengthened yesterday after the optimistic comments by the FOMC member John Williams. He anticipates further interest rate hikes by Fed.

After that, the risk-off sentiment contributed to the rise of the greenback. As for the euro, the Italian budget news keeps triggering investors and traders.

If the EUR is supported by the positive news from Italy, EUR/USD can rise towards the resistance at 1.1391. Otherwise, if the USD keeps gaining, the pair can stick below the support at 1.1329.

The European Central Justice announced on Tuesday that the UK could withdraw the Article 50 anytime. That means the country can move out of Brexit and stay within the European Union. However, the British Prime Minister said the country would not quit Brexit under any circumstances. In addition, May lost the three key votes yesterday. Two of them were forcing her to publish secret government legal advice on her Brexit deal. The prime minister said she would release it on Wednesday.

If more uncertainties on the Brexit agreement come out, GBP/USD can stick below the support at 1.2694. In case of more certainty, the pair will rise towards the resistance at 1.2778.

The Bank of Canada rate statement is scheduled at 17:00 MT time. We anticipate the central bank to leave the rates unchanged this time, however, the Governor Stephen Poloz and his colleagues may provide hawkish statements, which may signal the possible increase in the rate in January. In addition, the recently-signed USNCA agreement supports the BOC's hawkish view. If the BOC delivers supportive comments for the CAD, USD/CAD will fall towards the support at 1.3195. If the central bank’s statement disappoints investors and the USD is stronger, USD/CAD will stick above the resistance at 1.3277.

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Ekaterina Gorbatenko

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