Russian attacks continue, Fed Powell testimony
USD/JPY => The pair rises above 115.00
USD/CAD => The pair falls towards 1.27
EUR/GBP => The pair rises above 0.8350
USD/JPY looks to Ukraine, Fed Powell
USD/JPY fell for a second straight day yesterday as the Japanese yen benefited from safe haven demand and expectations of the Fed hiking interest rates by 0.5% in March eased.
Despite upbeat US economic data, with manufacturing growing at a faster pace than expected, uncertainty surrounding Ukraine could prevent the Fed from aggressively hiking rates.
Today the pair is heading higher amid cautious optimism as Russia, Ukraine peace talks take place. US ADP private payroll data is also due, along with a testimony from Fed Chair Powell which could shed some light on the Fed’s plans for rate hikes this year as Ukraine uncertainty clouds the Fed’s pivot to tighter monetary policy
| US ISM Manufacturing PMI
US ADP Payrolls |
Actual: 58.6 (1)
Expected: 388k (687k) |
Previous: 57.6
Previous: -301k |
Where next for USD/JPY?
USD/JPY has been trading in a sideways pattern since early February, although the longer-term uptrend is still holding, just.
The price has been capped on the upside by around 115.70 and by around 114.70 on the lower side.
The price is trading towards the lower end of the horizontal pattern having slipped below the 50 sma, buy has found support from the rising trendline.
The RSI is neutral and gives few clues.
For a breakout trade, sellers would be looking for a move below 114.70 and 114.50 the February 22 low to expose the 100 sma at 115.40. A break below here could spark a deeper selloff towards 113.50 the year to date low.
On the upside, buyers will be looking for a break above 115.30 yesterday’s high, to attack 115.70 and the 116.00 round number, 116.35 and fresh year today highs.
USD/CAD awaits BoC rate decision
The Canadian dollar fell against its US counterpart on Tuesday, booking losses after two straight days of gains.
Demand for the greenback overshadowed stronger Canadian GDP data and oil prices roaring higher. Oil topped $110 per barrel but the positive correlation between oil and CAD appears to have broken down recently.
Today the pair is lower as all eyes turn to the BoC, which is expected to raise interest rates by 0.25%. The central bank is then expected to hike 5-6 times across the year.
| Canadian GDP Q4 YoY | Actual: 6.7% (0.4%) | Previous: 5.5% |
EUR/GBP rises on cautious optimism
EUR/GBP fell 0.1% yesterday marking its second straight day of losses.
The pair fell as investors worried over the impact of the Russian invasion on the eurozone which is both physically and economically closely tied to Russia and Ukraine.
On the data front, the German manufacturing PMI was downwardly revised. However, German inflation ticked higher 5.2%.
Today the pair is edging higher as Russia and Ukraine agree to talk again, although fighting continue. Eurozone inflation data is expected to show a jump in consumer prices to 5.4% in February, up from 5.1%. Still high inflation may not even force the ECB’s hand to raise interest rates this year, with expectations for a rate hike increasingly being pushed back due to the uncertainty stemming from Ukraine.
| German inflation
EZ Inflation |
Actual: 5.1% (0.2%)
Expected: 5.4% (0.3%) |
Previous: 4.9%
Previous: 5.1% |
Support for the pair can be seen at 0.8300 (round number) and 0.8285 (2022 low)
Resistance for the pair can be seen at 0.8379 (50 sma) and 0.84 (round number)
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