The USD/CAD pair struggled to extend gains beyond 1.27 levels as crude prices in the US recovered from the daily lows. The talks between Iran and major powers were extended today, which increased the possibility of a last minute deal. Thus, crude prices had weakened, which saw the pair test 1.27 levels. So far we have not heard any news of a last minute deal being reached. Thus, Crude prices could turn positive ahead of the weekly supply data in the US. In such a case USD/CAD pair could drop to 1.27 levels. Moreover, the supply data is likely to show additions to inventories, which are already at record highs. However, markets are likely to focus more on Iran deal. A failure to reach a deal could lead to strength in Crude and the Canadian dollar.
In the meantime, a better-than-expected ADP report and the PMI report in the US could see the pair re-test 1.27-1.2730 levels. However, the pair could be sold on rallies in case Crude prices rebound. A positive surprise from the Canadian PMI could also help the CAD.
On the hourly chart, the pair is trading below 1.2694, which is the 23.6% Fib retracement level of 1.2409-1.2782. A failure to rise above 1.27 is could push the pair below the rising trend line support at 1.2662. In such a case, the hourly RSI, currently at 51.00, would also turn bearish, thereby pushing the pair lower to 1.2639-1.26 levels. As mentioned earlier, another attempt at 1.2730 is possible in case of a better-than-expected US data, however, an hourly close above 1.27 is essential for the pair to rise to 1.2782 levels.
GBP/JPY: Could drop to 176.50 on strong US data
The GBP/JPY pair weakened to 177.33 levels during the European session today. The Pound, despite of a better-than-expected manufacturing PMI, fell on election uncertainty. Meanwhile, the Japanese Yen has been relatively stable against the US dollar due to the weakness in the US Treasury yields. Thus, the British Pound appears more vulnerable to a better-than-expected US ADP data and PMI data.
On the other hand, the Japanese Yen could outperform GBP even if the US data prints lower than expected. The 10-year yields in the US are already down to 1.93%. A weak US data could push the yield below 1.9%, thereby pushing the Yen higher.
On the charts, the GBP/JPY pair appears weak after having failed to sustain gains above 5-DMA and 10-DMA located at 177.55 and 177.85 levels. This, coupled with the daily bearish RSI could push the pair lower to 176.50 levels. On the other hand.
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