CAD
- The BoC left interest rates at 5.00% as expected at the last meeting but remains prepared to raise rates further if needed.
- BoC Governor Macklem delivered a less hawkish speech in the press conference compared to his previous remarks.
- The recent Canadian CPI missed expectations across the board and the underlying inflation measures eased, which was a welcome development for the BoC.
- On the labour market side, the latest report missed expectations across the board with negative figures in full-time employment and slowing wage growth, which is going to be another positive outcome for the central bank.
- The market doesn’t expect the BoC to hike anymore.
JPY
- The BoJ kept its monetary policy basically unchanged at the last meeting but formally widened the YCC to 1% on the 10-year JGBs stating that it will be a reference cap.
- Governor Ueda repeated once again that they won’t hesitate to take easing measures if needed and that they are not foreseeing sustainable price increases.
- The Japanese CPIlast week showed that inflation pressures are easing although they remain well above the BoJ’s 2% target.
- The latest Unemployment Rate remained unchanged near cycle lows.
- The Japanese Manufacturing PMI fell further into contraction, but the Services PMI ticked higher remaining in expansion.
- The latest Japanese wage data beat expectations. As a reminder the BoJ is focusing on wage growth to decide whether to tweak its monetary policy.
- The market expects the BoJ to keep interest rates unchanged at the next meeting as well.
CADJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that CADJPY bounced on the key support around the 107.50 level and rallied almost all the way back to the resistance around the 110.00 handle. The price action remains rangebound, but the slowing economic data in the US and Canada might turn the pair lower and lead to a downside breakout, so that’s something to watch out for carefully.
CADJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that we have a short-term bearish setup with a resistance zone around the 108.80 level where we can also find the confluence with the 50% Fibonacci retracement level and the trendline. We can expect the sellers to step in here with a defined risk above the trendline to position for a selloff into the support and ultimately targeting a breakout. The buyers, on the other hand, will want to see the price breaking higher to invalidate the bearish setup and position for a rally into the highs.
CADJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see more closely the bearish setup. The price is already reacting to the resistance as the sellers are starting to pile in. If the price breaks below the counter-trendline we can expect the sellers to increase the bearish bets into the support. The buyers should wait around the 107.50 support or wait for a break above the trendline to position for the upside.
Upcoming Events
Tomorrow we will get the Canadian GPD report and then the US PCE and US Jobless Claims data. On Friday, we conclude the week with the Japanese Labour Market data and then the Canadian Labour Market and Manufacturing PMI reports followed by the US ISM Manufacturing PMI. Weaker US data is likely to strengthen the JPY as global yields should fall further. Conversely, strong figures are likely to weigh on the Yen in the short-term.
