USD/CAD Rally Stalls, RSI Buckles Following Upbeat Canada Employment

Talking Points:

USD/CAD Advance Stalls, RSI Pulls Back From Overbought Territory on Strong Canada Employment.

USD/JPY Continues to Eye 116.00 Hurdle; Bullish Series during Risk Ahead of FOMC BoJ Meeting.

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USD/CAD Daily

USD/CAD Rally Stalls, RSI Buckles Following Upbeat Canada Employment

Chart – Created Using Trading View

  • USD/CAD pares a allege from progressing this week as Canada Employment suddenly increasing 15.3K in February, with a sell rate during risk for serve waste as a Relative Strength Index (RSI) struggles to reason in overbought territory; unsuccessful try to exam a Nov high (1.3599) might pull dollar-loonie behind towards a reduce finish of a 2017-range, yet a broader opinion stays constructive as a span continues to work within a descending channel carried over from a prior year.
  • The 105.1K enlargement in full-time positions might inspire a Bank of Canada (BoC) to adopt an softened tinge during a subsequent process assembly on Apr 12, yet a ongoing debility in a Labor Force Participation rate might keep a executive bank on a sidelines as ‘subdued enlargement in salary and hours worked continue to simulate determined mercantile tardy in Canada;’ as a result, Governor Stephen Poloz and Co. might boost their efforts to tame seductiveness rate expectations and validate a wait-and-see proceed for financial process generally as ‘the Bank’s 3 measures of core inflation, taken together, continue to indicate to element additional ability in a economy.
  • With singular information prints entrance out of Canada subsequent week, a Federal Open Market Committee (FOMC) assembly is approaching to figure a near-term opinion for USD/CAD as a executive bank is scheduled to recover a updated projections for growth, acceleration and a seductiveness rate, yet a miss of movement to reason above a Fibonacci overlie around 1.3450 (23.6% retracement) to 1.3460 (61.8% retracement) might open adult a downside targets, with a initial segment of seductiveness entrance in around 1.3360 (38.2% retracement).

USD/JPY Daily

USD/JPY Daily Chart

Chart – Created Using Trading View

  • Despite a churned marketplace greeting to a NFP report, a mangle of a of a Feb high (114.96) accompanied by a new array of aloft highs lows keeps a near-term disposition slanted to a topside generally as a Federal Open Market Committee (FOMC) is widely approaching to lift a benchmark seductiveness rate by 25bp on Mar 15; however, disaster to tighten above a 115.10 (50% retracement) jump might criticise a new allege in a sell rate, with a span during risk of confronting range-bound conditions as marketplace participants try to sign a destiny gait of a Fed’s normalization cycle.
  • Even yet Fed Fund Futures still cost a 90% luck for a Mar rate-hike, a dollar stands during risk of confronting a knee-jerk greeting as marketplace courtesy turns to a slew of uninformed estimates; a FOMC appears to be on march to serve normalize financial process in 2017, yet officials might quell expectations for a array of rate-hikes as Chair Janet Yellen warns ‘inflation altered adult over a past year, especially since of a abating effects of a progressing declines in appetite prices and import prices.’
  • The cabinet might try to buy some-more time as ‘market-based measures of acceleration remuneration sojourn low; many survey-based measures of longer-term acceleration expectations are small changed, on balance,’ and a greenback might onslaught to reason a belligerent should executive bank officials prominence a serve rebate in a longer-run seductiveness rate forecast.
  • Nevertheless, a Bank of Japan (BoJ) might keep a doorway open to serve embark on a easing-cycle as a executive bank struggles to grasp a 2% aim for inflation, yet Governor Haruhiko Kuroda and Co. seem to be in no rush to adjust a Quantitative/Qualitative Easing (QQE) Program with Yield-Curve Control as ‘there is not most odds that we will serve reduce a disastrous rate; some-more of a same tongue might hint a singular marketplace greeting as a executive bank sticks to a sidelines.
  • Lack of movement to tighten above 115.10 (50% retracement) might furnish a identical greeting from progressing this year, with dollar-yen during risk of tracking a near-term operation as a span stays capped by a Fibonacci overlie around 116.00 (38.2% retracement) to 116.10 (78.6% expansion); initial downside segment of seductiveness entrance in around 114.00 (23.6% retracement) to 114.30 (23.6% retracement) followed by 113.10 (78.6% retracement).

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— Written by David Song, Currency Analyst

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