Canada’s and Australia’s CPI rates in focus

Amidst low volatility in the FX market, the USD edged lower against its counterparts yesterday. On a monetary level we note a softening of the Fed’s stance by San Francisco Fed President Daly’s statements yesterday, where mentioned that inflation should not be the only concern of the bank. The weakening of the USD allowed for USD/JPY bulls to take a breather yesterday, yet the bullish tendencies for the pair are still present and the correction may prove to be temporary.

North of the US border, Loonie traders are to focus on the release of Canada’s CPI rates for May. The headline rate is expected to edge lower and should it be accompanied by a slow-down of core rate we may see the CAD slipping, as the release would imply further easing of inflationary pressures in the Canadian economy and could enhance the market’s expectations for a rate cut in the July meeting adding more pressure on BoC. Furthermore, we would also note that rising oil prices could provide some support for the CAD and oil traders may keep a close eye on the release of API’s weekly crude oil inventories figure. A possible rise of US oil inventories could weigh on oil prices though, as it would imply the continuance of a slack in the US oil market.

USD/CAD edged lower yesterday following last week’s bearish tendencies, yet the movement remains well within the boundaries set by the 1.3600 (S1) support line and the 1.3775 (R1) resistance level. We tend to maintain a bias for the sideways motion ot continue for the time being and as long as the prementioned levels are respected by the price action. We note though that some slight bearish tendencies seem to be present as the RSI indicator has breached below the reading of 50 and is still aiming for lower grounds. Should the bears actually take the lead, we expect the pair to break the 1.3600 (S1) support line and aim for the 1.3460 (S2) support base. Should the bulls get in the driver’s seat, we may see the pair breaking the 1.3775 (R1) resistance line and aim for the 1.3895 (R2) resistance level.

In the land of the down under during tomorrow’s Asian session we get May’s CPI rates. Should the headline rate slow down from current level of 3.8% yoy, we may see the Aussie slipping as it would imply that inflationary pressures are easing. On the other hand, the rates are still a way off RBA’s 2-3%yoy inflation target zone and the bank may need to keep rates high for longer in order to set inflation under control. On a fundamental level, Aussie traders may keep a close eye on China, given also the weakening of the Yuan, but also a more risk-oriented market mood could support the riskier Aussie, while on a monetary level, RBA Assistant Governor Kent is scheduled to speak and some hawkish comments could provide additional support for the Aussie. Once again the prime issue tomorrow is to be the release of May’s CPI rates.

AUD/USD edged higher yesterday, yet overall remained within a sideways motion in the boundaries set by the 0.6575 (S1) support line and the 0.6715 (R1) resistance line. We tend to maintain our bias for the sideways motion to continue and we intend to keep it as long as the pair’s price action remains within the channel forms by the prementioned boundaries. Please note that the RSI indicator currently tends to remains near to the reading of 50, implying a rather indecisive market, while the 20, 100 and 200 moving averages have flattened, which could allow for a continuance of the sideways motion of the pair. For a bullish outlook we would require the pair’s price action to break the 0.6715 (R1) resistance line and aim for the 0.6870 (R2) resistance barrier. On the flip side for a bearish outlook we would require the pair’s price action to break the 0.6575 (S1) support line and take aim of the 0.6445 (S2) support level.

Other highlights for the day

After a rather easy-going European session, we note the release of the US June’s consumer sentiment and Richmond Fed Composite Index. On the monetary front, we note that Fed Board Governors Bowman and Cook are scheduled to speak.