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 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 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 market expects the BoJ to hike rates in Q2 2024.

CADJPY Technical Analysis – Daily Timeframe

CADJPY Technical Analysis
CADJPY Daily

On the daily chart, we can see that CADJPY continues to trade in a range between the 107.50 support and the 110.00 resistance. In such markets, it’s generally best to stay out and wait for a clear breakout supported by a fundamental catalyst, although traders can also “play the range” by buying at support and selling at resistance.

CADJPY Technical Analysis – 4 hour Timeframe

CADJPY Technical Analysis
CADJPY 4 hour

On the 4 hour chart, we can see that we have some minor levels on interest where the price reacted to recently. The buyers leant on the recent swing low to position for rally into the swing high at 108.80. If the price breaks above the 108.80 level, the rally should extend to the 110.00 handle as the buyers will likely increase the bullish bets. On the other hand, if the price breaks below the 108.00 handle, we can expect a drop into the key support at 107.50 with the sellers eyeing a breakout.

CADJPY Technical Analysis – 1 hour Timeframe

CADJPY Technical Analysis
CADJPY 1 hour

On the 1 hour chart, we can see that the latest leg lower diverged with the MACD which is generally a sign of weakening momentum often followed by pullbacks or reversals. In this case, we indeed got a bounce on the swing low and the first target for the buyers should be the 108.80 level. That’s where the sellers are likely to step in with a defined risk above the level to position for a drop into the key support at 107.50.

Upcoming Events

Today we have another US labour market report with the release of the US ADP data followed by the BoC rate decision later. Tomorrow, it will be the time for the US Jobless Claims figures, while on Friday we conclude the week with the NFP report. Weak US data is likely to weigh on global yields and favour the JPY, while strong figures might keep the pair supported.