Massive Reversal on Manic Monday

A wave of commodity buying splashed some impressive reversals on the charts. The Canadian dollar was the top performer while the US dollar lagged. The Australian dollar was also soft with a key RBA decision just hours away.  Ahead of tonight's RBA decision and this week's BoC announcement, Premium trades include USDJPY, USDCAD, AUDCAD and EURGBP. Charts and relevant trade ideas are in the Premium Insights.

The OPEC decision and Swiss referendum sparked a tide of selling in early trading Monday but it was overwhelmed by a later tsunami of buyers. Crude rallied 7% from the intraday lows, gold climbed nearly $80 and silver jumped 17%.

The most compelling chart might be gold. The bullish reversal engulfed the previous 15 days of trading and the close was well-above the November high. The textbook says that's one of the strongest buying signals. Still, it's challenging to envision a compelling reason to buy gold (ECB QE perhaps?).

In FX, US dollar selling was the main theme. USD/CAD also posted an outside reversal with the BOC looming on Wed. Poloz is faced with the conflict of quickly-improving economic data but plunging energy prices.

One thing that's important to keep in mind is that this is the final RBA decision until February so whatever Stevens says will have to last for more than 2 months. That could make officials more dovish as they think about heading on vacation rather than managing a stumbling economy.

The decision is scheduled for 0330 GMT. If the RBA hints at more cuts the key level to watch will be the Asia-Pacific low of 0.8418. That was also the lowest level since 2010.

Other data on the calendar includes Australian Q3 current accounts and building approvals but both will be overshadowed by Stevens. A final event to watch is a rate decision from the Reserve Bank of India; there is talk of a rate cut with inflation falling.