CAD
- The BoC kept the interest rate steady at 5.00% as expected with the usual caveat that it’s prepared to raise the policy rate further if needed.
- BoC Governor Macklem recently has been leaning on a more neutral side as inflation continues to abate.
- 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 beat expectations although the unemployment rate ticked higher again.
- The market expects the BoC to start cutting rates in Q2 2024.
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 latest Japanese CPIshowed 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 and as a reminder the BoJ is focusing on wage growth to decide whether to tweak its monetary policy.
- The BoJ Governor Ueda last week delivered some interesting comments where it looked like the central bank was indeed considering rate hikes in 2024.
- The market expects the BoJ to hike rates in Q2 2024.
CADJPY Technical Analysis – Daily Timeframe
On the daily chart, we can see that CADJPY tumbled for hundreds of pips after breaking below the support at 107.50. The catalyst for this huge move were some interesting comments from BoJ Governor Ueda where he hinted to rate hikes coming in 2024. The pair bounced on the swing low at 104.25 and reversed almost all the losses with the price retesting the support now turned resistance.
CADJPY Technical Analysis – 4 hour Timeframe
On the 4 hour chart, we can see that the price probed above the resistance to touch the 108.00 handle before reverting back below the resistance. The sellers are likely to pile in around these levels to position for another drop into the 104.25 level and target a break lower. The buyers, on the other hand, will want to see the price breaking above the resistance again to position for a rally into the trendline around the 108.70 level.
CADJPY Technical Analysis – 1 hour Timeframe
On the 1 hour chart, we can see that there’s not much to do in the meantime as the price is trading right in the middle of the resistance and the support around the 106.80 level. If the price breaks below the support, we can expect the sellers to increase the bearish bets into the lows. On the other hand, if the price break above the resistance, the buyers will look towards the 108.70 level.
Upcoming Events
Today, we have the US PPI data followed by the FOMC rate decision where the Fed is expected to keep interest rates unchanged. Tomorrow, we will see the latest US Retail Sales and Jobless Claims figures, while on Friday we conclude the week with the Japanese and the US PMIs.
