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It looks like Loonie traders are on edge ahead of Canada’s CPI release, as CAD/JPY is stuck in tight consolidation.
Which way might it break out?
Before moving on, ICYMI, yesterday’s watchlist looked at AUD/JPY’s triangle pattern ahead of the PBOC loan rate setting. Be sure to check out if it’s still a good play!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
U.S. and Canadian markets closed in commemoration of President’s Day
People’s Bank of China announced largest 5-year prime loan rate cut on record, slashing it down from 4.20% to 3.95% vs. estimated 4.10%
PBOC kept 1-year prime loan rate on hold at 3.45% as expected
RBA monetary policy meeting minutes still kept the door open for more interest rate hikes since “inflation remained well above the target, with services price inflation reflecting excess demand”
Swiss trade surplus expanded from 1.27 billion CHF to 4.74 billion CHF vs. 2.35 billion CHF forecast in January
Price Action News
Overlay of USD vs. Major Currencies Chart by TradingView
It was still a sluggish day for the major currencies, as markets are waiting on traders to return from their long weekend holidays.
Not even the largest PBOC prime loan rate cut on record was enough to spur a strong reaction across the board, as commodity currencies still snoozed in their ranges.
Still, the Greenback managed to stay afloat and even chalk up a few gains, particularly against the Swiss franc and Loonie, as traders may be bracing for Canada’s CPI release later today.
Upcoming Potential Catalysts on the Economic Calendar:
BOE monetary policy report hearings at 10:15 pm GMT
Canadian CPI reports at 1:30 pm GMT
New Zealand GDT auction coming up
New Zealand quarterly PPI input and output at 9:45 pm GMT
Australia’s MI leading index at 11:30 pm GMT
Australia’s quarterly wage price index at 1:30 am GMT
Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! ️
CAD/JPY 15-min Forex Chart by TradingView
Check out this tight range on the 15-min time frame of CAD/JPY!
Traders are likely holding their breaths ahead of the Canadian CPI release later, as the outcome of the inflation reports might influence BOC policy forecasts.
Analysts are expecting a rebound in monthly CPI while the headline reading might still dip on a year-over-year basis. Leading indicators are pointing to weaker price pressures as well.
With that, a breakdown from the tight range could spur a selloff to the next downside targets at S1 (111.14) then S2 (111.07) near a major psychological mark.
On the other hand, a significant upside surprise might be enough to cement the BOC’s hawkish stance, which would be in stark contrast to that of the BOJ. In that case, CAD/JPY could pop higher and set its sights on the upside targets at R2 (111.47) then R3 (111.55) near the previous week high.
Additional volatility might be in the cards since U.S. and Canadian traders will be returning from the President’s Day holiday and likely reacting to the massive PBOC prime loan rate cut earlier today.
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