CAD Outlook Weighed by Subdued Oil Prices; NAFTA Renegotiation

Talking Points:

USD/JPY Continues to Track Risk Sentiment; Downside in Focus Ahead of U.S. 4Q GDP Report.

USD/CAD Post-BoC Rally Accompanied by Subdued Oil Prices; Trump to Renegotiate NAFTA.

DailyFX Table

USD/JPY Daily

USD/JPY Daily Chart

Chart – Created Using Trading View

  • USD/JPY gapped reduce to start a final full-week of January, with a span during risk for a serve decrease as a Relative Strength Index (RSI) preserves a bearish trend carried over from a prior month; will keep a tighten eye on a Nikkei 225 as it broadly moves in tandem with a dollar-yen sell rate, and a downside targets sojourn in concentration for both a dollar-yen and a benchmark equity index as they sojourn stranded in a double-top arrangement (measured pierce highlights a risk for a pierce behind towards a 110.00 handle).
  • Japan’s Consumer Price Index (CPI) might fuel conjecture for additional financial support as a core-core rate of inflation, that strips out flighty equipment such as food and appetite costs, is approaching to agreement an annualized 0.1% in December, though a debasement in a internal banking might inspire a Bank of Japan (BoJ) to keep a standing quo during a Jan 31 seductiveness rate preference as Governor Haruhiko Kuroda stays assured in achieving a 2% aim for acceleration over a process horizon; a Federal Reserve also looks staid to safety a stream process during a Feb 2 rate preference as a 4Q U.S. Gross Domestic Product (GDP) news is approaching to uncover a enlargement rate augmenting an annualized 2.2.% followed a 3.5% enlargement during a three-months by September.
  • USD/JPY appears to have done a unsuccessful try to work a approach behind towards a monthly opening operation as it stays capped by a 20-Day SMA (115.69), with a span during risk of creation another run during near-term support around 112.40 (61.8% retracement) to 112.50 (38.2% retracement) should risk view continue to abate.

USD/CAD Daily

USD/CAD Daily Chart

Chart – Created Using Trading View

  • The Canadian dollar debility following a Bank of Canada (BoC) seductiveness rate decision might insist over a near-term generally as U.S. President Donald Trump pledges to renegotiate a North American Free Trade Agreement (NAFTA) and exercise a ‘very vital limit tax;’ will also keep a tighten eye on wanton as it stays capped by a $55 handle, and resigned oil prices might hint bets for additional financial support as BoC Governor Stephen Poloz endorses a dovish opinion for financial policy.
  • Despite a ongoing enlargement in a labor market, a BoC might come underneath vigour to serve isolate a genuine economy in 2017 as officials advise a ‘new measures of core acceleration are all subsequent 2 percent presently, weighed down by additional ability in a economy,’ and a dollar-loonie might continue to carve a long-term array of aloft highs lows amid a devious paths for policy.
  • Broader opinion for USD/CAD stays understanding as a cost a RSI safety a bullish formations carried over from a prior year; unsuccessful run during a Oct low (1.3006) keeps a topside targets in concentration over a near-term, with a tighten above 1.3350 (78.6% retracement) opening adult a subsequent segment of seductiveness around 1.3460 (61.8% retracement).

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CAD Outlook Weighed by Subdued Oil Prices; NAFTA Renegotiation

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— Written by David Song, Currency Analyst

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