Canada’s employment data to rock the Loonie

The USD edged lower against its counterparts yesterday, with a clear exception being against the Yen as the pair tended to stabilise and the rate tends to remain fragile as the market hesitates to sell the JPY in fear of a possible market intervention by the Japanese government. On a monetary policy level, we note that San Francisco Fed President Daly added another hawkish comment, as she stated that more time with high rates is needed before feeling confident that inflation is slowing towards the bank’s 2% target.

On a technical level, USD/JPY stabilised yesterday and during today’s Asian session just below the 155.80 (R1) resistance line. For the time being, we tend to maintain our bias for the sideways motion to continue, yet note that the possibility of a bullish outlook remains enhanced. The RSI indicator remains above the reading of 50, implying now a bullish predisposition of the market for the pair. Yet for a bullish outlook we would require USD/JPY to clearly break the 155.80 (R1) resistance line, with the next possible target for the bulls being the 158.35 (R2) resistance level. On the flip side should the bears take over, we may see the pair breaking the 153.80 (S1) support line and continue to break also the 151.90 (S2) support base.   

On a fundamental level, we note the geopolitical tensions surrounding China. The US Government seems to be preparing to impose tariffs on China and media report that it may happen as soon as next week. The new tariffs are expected to focus on industries including electric vehicles, batteries and solar cells, with existing levies largely being maintained. Overall the tensions in the US-Sino relationships on a trading level, may turn the market sentiment more cautious thus weighing on riskier assets such as commodity currencies and equities while at the same time providing support for safe-haven assets.

As for financial releases today, we note the release of Canada’s employment data for April. The unemployment rate is expected to tick up to 6.2%, while the employment change figure to rise and reach 18k if compared to March’s -2.2k. Despite the forecasts implying mixed signals for the Canadian employment market which could weigh somewhat on the Loonie, we note that a possible rise of the employment change figure beyond expectations could provide some support for the CAD.

USD/CAD remained edged lower yesterday, yet in the big picture tends to remain in a sideways motion between the 1.3755 (R1) resistance line and the 1.3610 (S1) support level. We tend to maintain our bias for the sideways motion to continue, given that the RSI indicator continues to run along the reading of 50, implying a possibly indecisive market, while the Bollinger bands seem to narrow implying lower volatility, with both features allowing for a continuation of the rangebound movement. Should the bulls be able to take over, we may see the pair breaking the 1.3755 (R1) resistance line, opening the gates for the 1.3895 (R2) resistance barrier. Should the bears take over, we may see the pair breaking the 1.3610 (S1) support hurdle and taking aim of the 1.3460 (S2) support base.   

Other highlights for the day:

In today’s European session we get UK’s GDP rates for March and Q1 and Norway’s CPI rates for April. On the Monetary front, we note that ECB’s Cipollone, and Elderson as well as BoE’s chief economist Pill and MPC member Dhingra are scheduled to speak,  while ECB is to release the minutes of the April meeting. In the American session, besides Canada’s April employment data we also get the preliminary US University of Michigan consumer sentiment. On the monetary front, we note that Fed Board Member Bowman, Minneapolis Fed President Kashkari, Dallas Fed President Logan and Fed Vice Chair Barr are scheduled to speak. In Monday’s Asian session, we get Australia’s NAB Business conditions and Business Confidence indicators for April. 

USD/JPY Daily Chart

• Support: 153.80 (S1), 151.90 (S2), 149.00 (S3)
• Resistance: 155.80 (R1), 158.35 (R2), 160.35 (R3)

USD/CAD Daily Chart

• Support: 1.3610 (S1), 1.3460 (S2), 1.3335 (S3)
• Resistance: 1.3755 (R1), 1.3895 (R2), 1.4050 (R3)

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