In the week gone by we saw a solid comeback in the US dollar versus its major rivals supported by upbeat US macro releases viz., Thursday’s weekly jobless claims, Chicago PMI, Core PCE inflation and Friday’s in line factory data and above estimates consumer sentiment data. Moreover, the majors reached levels not witnessed in the past 2-3 months amid US Fed’s and BOJ’s policy statement.
For the week ended April 24, we published two macro ideas, both under JPY Forecast – first on USD/JPY and the second on CAD/JPY as yen was anticipated to undermine most majors.
The first macro report titled “USD/JPY Forecast: to extend to 120.10‐120.80, key support at 118.30 amid FOMC & BOJ” was published on April 29. USD/JPY was expected to display a descending triangle break out on the upside and continue its prior bullish trend, reaching 120.10/120.50 target range within the last week. Our analysis and prediction played out exceptionally well as the major did break the triangle formation and surpassed the expected target of 120.10 on Thursday (April 30) and printed fresh two-week highs at 120.30 on Friday (May 1), just 20 pips shy of our anticipated second target of 120.50.
The US dollar regained lost ground soon after FOMC statement release as the statement was widely viewed as less dovish with Fed’s rate hike stance on track, albeit on meeting-by-meeting basis. Further push to the upside was led by impressive US data releases towards the later part of the week which re-ignited June rate-hike bets boosting the USD bulls. Moreover, BOJ monetary policy decision turned out to be eventless with no sustained support provided to the yen.
The second report titled “CAD/JPY Forecast: could test 99.70 today” was published on May 1. The idea did work in the broader sense that, the CAD/JPY cross managed to keep the given 98.35-99.22 range. The cross hovered within the slim range, failing to breach the resistance at 99.20-99.25 and losses restricted well above 10-DMA support located at 98.35.
As explained in the report, “We expect CAD/JPY to break above the 99.20-99.25 resistance zone and extend gains to reach 99.70 levels. On the contrary, if the cross fails to hold above 10-DMA support located at 98.35 levels, a fresh sell-off may trigger dragging CAD/JPY lower to next support at 97.50 levels.”
However, the pair failed to gain momentum on either side and kept the range as the yen weakness versus the greenback was offset by higher USD/CAD with the loonie reaching fresh weekly lows at 1.2205.
Week Ahead:
A busy week ahead, with host of economic releases world-wide, though UK elections on May 7 and Nonfarm payrolls data from the US on May 8 are expected to be the major market movers this week.
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