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USD Index Recovers Back To Unchanged, CAD Surge Short-Lived

FOREX
  • USDCAD was in focus on Wednesday as the bank of Canada surprised the market with a 25bp hike. USDCAD weakened into the decision and extended this move to print as low as 1.3322 in the immediate aftermath. However, the move was fairly short-lived as greenback strength throughout the US session stalled any downside momentum for the pair.
  • Assisted by the BOC’s hawkishness, US yields climbed between 10-15bps across the curve at one point which buoyed the US dollar. After some initial weakness, the USD index rose around 0.5% to trade back to unchanged on the session.
  • With yield differentials widening, the Japanese Yen has suffered with USDJPY rising as much as 120 pips from the lows to print 140.23 in late trade. Trend conditions in USDJPY remains bullish. Attention is on key resistance at the top of a bull channel, drawn from the Jan 16 low, which intersects at 141.11 today. A clear break of this level would reinforce a bullish theme and open 141.61, the Nov 23 2022 high. Key support to watch is 138.45, the 20-day EMA.
  • Some renewed pressure on major global equity indices, the move higher in U.S. Tsy yields and the associated bounce for the greenback all led USD/CNH back towards the day’s highs with the pair printing a fresh year-to-date high of 7.1533 approaching the APAC crossover on Wednesday. A sustained break above 7.1500 might expose bull channel top resistance, currently located at CNH7.1665. It is worth noting that both domestic PPI and CPI data for May will cross on Friday.
  • A very light global economic calendar on Thursday as all eyes remain focused on the US CPI print next week, which precedes the June FOMC decision.
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