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JPY Consolidates Early Decline, Moderately CAD Weakness as BoC Cuts

FOREX
  • Following the strong JPY rally this week, more optimistic price action for global equities has seen the Japanese Yen retrace substantially on Wednesday. USDJPY stands up 0.83% on the session, having risen back above the 156 handle, where it has been consolidating across the majority of the US session.
  • On Tuesday, initial support was exposed at 154.66, the 50-day EMA. Despite the level being pierced (154.55 low), the strong subsequent bounce keeps this key support zone intact for now. Adding weight to this area, 153.93, a trendline drawn from the Dec 28 low, remains the key support. For bulls, a move above 157.71, the May 29 high, is required to resume a short-term uptrend.
  • A first 25bp cut from the Bank of Canada and a signal to likely cuts ahead prompted some sharp initial weakness for the Canadian dollar. The immediate spike higher in USD/CAD saw the pair reach highs of 1.3741 before slowly edging back towards the 1.3700 mark as we approach the APAC crossover.
  • With the ECB also taking place this week, it is worth noting that EURCAD printed as high as 1.4929, a fresh 6-month high. The cross notably pierced above trendline resistance from the July 2020 highs, and a close above this mark will be closely monitored in coming sessions.
  • The more stable risk backdrop also weighed on the Swiss Franc, although the move lagged the Japanese Yen leg lower, as SNB’s Jordan’s recent hawkish remarks continue to add a short-term boost to the Swiss Franc. EURCHF continues to oscillate either side of 0.9700 and remains 2.2% below last week’s highs.
  • EURUSD trades a tight range ahead of the ECB, just below the 1.0900 mark. Despite the pullback in EURUSD from Tuesday’s high, a bull cycle remains in play and sights are on 1.0933, a Fibonacci retracement.
  • ECB decision and press conference takes focus on Thursday. US jobless claims is also scheduled, likely to play second fiddle to Friday’s US employment report for May.
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