CAD

  • The BoC left interest rates at 5.00% as expected 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 a 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 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 recent Japanese CPIshowed that inflationary pressures remain high with the core-core reading hovering at the cycle highs.
  • The Unemployment Rate remained unchanged near cycle lows.
  • The Japanese Manufacturing PMI matched the prior reading remaining in contraction with the Services PMI falling but holding on 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

CADJPY Technical Analysis
CADJPY Daily

On the daily chart, we can see that CADJPY continues to range between the 107.53 support and the 110.00 resistance. The price yesterday probed above the resistance following the miss in the US CPI report which weakened the USD across the board and strengthened all the other currencies. The big divergence with the MACD suggests that the pair might be near the top as the central banks move to the sidelines waiting for the economies to weaken further and the inflation rates to drop back to targets.

CADJPY Technical Analysis – 4 hour Timeframe

CADJPY Technical Analysis
CADJPY 4 hour

On the 4 hour chart, we can see that we have another divergence with the MACD right at the resistance which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we got the pullback into the trendline where the sellers are likely to step in with a defined risk below the trendline to position for a rally into the cycle highs.

CADJPY Technical Analysis – 1 hour Timeframe

CADJPY Technical Analysis
CADJPY 1 hour

On the 1 hour chart, we can see more closely the bullish setup with the support around the trendline and the 61.8% Fibonacci retracement level. The sellers, on the other hand, will want to see the price breaking below the trendline to invalidate the bullish setup and position for a drop into the 107.53 support.

Upcoming Events

Today, we have the US Retail Sales and PPI data with the market likely giving more importance to the Retail Sales data. Tomorrow, we will see the latest US Jobless Claims figures where the market will want to see how fast the labour market is softening.