Markets are in anti-JPY, pro-risk mood today!
Will today’s trends be enough to inspire a short-term reversal for CAD/JPY?
Before moving on, ICYMI, yesterday’s watchlist checked out GBP/USD’s rising wedge pattern after the U.K.’s GDP release and before the U.S. PPI report. Be sure to check out if it’s still a good play!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
A decline in production output and lack of growth in the service sector dragged NIESR’s U.K. GDP by 0.1% m/m in May after a 0.2% uptick in April
U.S. PPI slowed at a faster rate in June: 0.1% m/m (0.1% m/m forecast; -0.4% m/m previous); 0.1% y/y (0.4% y/y forecast; 0.9% y/y previous)
U.S. weekly initial jobless claims: 237K (241K forecast; 249K previous)
U.S. budget deficit widened to $227.8 billion in June, up from $240.3 billion shortfall in May and twice as large as the $88.8 billion figure in in the same period last year
St. Louis Fed Pres. James Bullard (a known hawk and a non-voter in 2023) announced his resignation by August 14
FOMC member Christopher Waller shared his support for two more 25bps rate hikes in 2023, adding “I see no reason why the first of those two hikes should not occur at our meeting later this month.”
In an interview, former BOJ chief economist Hideo Hayakawa said “I expect [BOJ] will make some kind of adjustment to YCC this month” before going back to monitoring outlook for “six months or so”
Australia’s Treasury has appointed current RBA Deputy Governor Michelle Bullock to succeed RBA Gov. Philip Lowe by September 18
Price Action News
A bit of profit-taking from the previous day’s rallies likely contributed to the safe-haven yen starting the day higher against its major counterparts.
Of course, it didn’t hurt JPY bulls that former BOJ economist Hideo Hayakawa hinted at a hawkish YCC policy adjustment in July.
The tides soon turned against the yen, however, thanks to Asian and European traders digesting a weaker U.S. PPI reading and pushing risk assets higher against safe havens like the yen.
Eurozone’s trade balance data at 9:00 am GMT
Canada’s manufacturing sales at 12:30 pm GMT
U.S. preliminary UoM consumer sentiment at 2:00 pm GMT
Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! 🔥 🗺️
Is the Loonie done losing pips against the yen?
What makes the reversal pattern more interesting is that the 100 SMA looks ready to cross above the 200 SMA and support a potential bullish reversal.
Think we’ll see CAD/JPY rally in the next trading sessions?
Supply disruptions in Africa and a risk-friendly mood in the markets could support a possible rally for the oil-related Loonie.
If CAD/JPY breaks above the Double Bottom “neckline” near 105.50, then we could see the pair jump to the 106.00 area near the R2 (105.92) levels.
But if enough bears take their cues from Stochastic‘s overbought signal and drag CAD/JPY lower, then the pair could go back to its previous areas of interest near 105.00.