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FOREX: CAD/JPY Uptrend Firms on Diverging BoC/BoJ Themes

FOREX
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  • The US CPI print came in just ahead of expectations, however the faster-than-expected inflation print is unlikely to deter a further 25bps rate cut from the Fed at next week's FOMC decision. The USD Index slipped in response, however losses were muted as US yields respected the recent range, and were generally contained.
  • JPY remained one of the poorest performers across European trade, with Bloomberg quoting sources in reporting that the BoJ see little cost in waiting for the next BoJ rate hike. As such, JPY remained offered, while the hawkish BoC rate cut kept the underlying CAD/JPY uptrend intact.  
  • A fourth consecutive session of lower lows and lower highs for EUR/GBP continues to pile pressure on support, with 0.8203 the level to watch - the Mar 7 ‘22 low and the lowest point of a multi-year range. A break through support here would work against the RSI and could tip the price into technically oversold territory for the first time since September. This week's break lower has cancelled a recent bullish signal - an engulfing candle on Nov 12 - as rate differentials and aggressive ECB pricing dictate play.
  • The ECB are expected to cut rates by 25bps Thursday, with much market focus on the projections out to 2025. We see Lagarde ruling out back-to-back cuts as a hawkish risk, and could prompt a swift reversal in dovish EUR pricing across recent weeks.
  • Focus Thursday turns to the Australian jobs release for November, at which the unemployment rate is seen climbing to 4.2%. The release will provide the latest litmus test for whether the recent aggressive dovish re-pricing of RBA policy is justified, particularly as the AUD/USD rate hit a new pullback low at 0.6337 on Wednesday. 
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  • The US CPI print came in just ahead of expectations, however the faster-than-expected inflation print is unlikely to deter a further 25bps rate cut from the Fed at next week's FOMC decision. The USD Index slipped in response, however losses were muted as US yields respected the recent range, and were generally contained.
  • JPY remained one of the poorest performers across European trade, with Bloomberg quoting sources in reporting that the BoJ see little cost in waiting for the next BoJ rate hike. As such, JPY remained offered, while the hawkish BoC rate cut kept the underlying CAD/JPY uptrend intact.  
  • A fourth consecutive session of lower lows and lower highs for EUR/GBP continues to pile pressure on support, with 0.8203 the level to watch - the Mar 7 ‘22 low and the lowest point of a multi-year range. A break through support here would work against the RSI and could tip the price into technically oversold territory for the first time since September. This week's break lower has cancelled a recent bullish signal - an engulfing candle on Nov 12 - as rate differentials and aggressive ECB pricing dictate play.
  • The ECB are expected to cut rates by 25bps Thursday, with much market focus on the projections out to 2025. We see Lagarde ruling out back-to-back cuts as a hawkish risk, and could prompt a swift reversal in dovish EUR pricing across recent weeks.
  • Focus Thursday turns to the Australian jobs release for November, at which the unemployment rate is seen climbing to 4.2%. The release will provide the latest litmus test for whether the recent aggressive dovish re-pricing of RBA policy is justified, particularly as the AUD/USD rate hit a new pullback low at 0.6337 on Wednesday.