Did the geyser burst for CAD? Low economic growth – Canadian growth fell by half in the third quarter – plus weaker oil prices and a weaker USD have undermined the Canadian dollar. Add, too, a frail housing market hit by quick-fire Bank of Canada rate rises following an over-extended 25-year price appreciation bender. Down on the loonie? A touch. Even as the USD fell this week USD/CAD managed to find small gains, here and there. “CAD has been on a weakening trend of late with GBP/CAD now attempting to breach April's highs,” says Equals Money market strategist Thanim Islam. “Lower job numbers today and we could easily see further gains on this pair.” The Bank of Canada (BoC) ducked a meeting in November following October’s cautiously worded 50bp rate rise, resisting a 75bp move. The BoC meets on Wednesday to decide whether to hike rates to 4.25%, a 50bp rise, or dial it down to 25bp.
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A sharpening Japanese yen, up 10% since October, maybe straggle behind GBP’s 16%-plus gains in the same period, but is JPY’s rally enough to lift it back on the ‘safe haven’ podium, alongside near neighbour CHF? USD/JPY sank again this morning, down 1.1% helped by signalling from Bank of Japan (BOJ) policy member Asahi Noguchi that the BOJ might wind in its stimulus marathon, under certain very tight conditions. Should wages climb with trend inflation – think wage and services pressures – then the BOJ could respond. It’s still a big If. "Trend inflation hasn't reached 2% yet. But if there's a certainty that level will be met, it won't be surprising for the BOJ to shift monetary policy," Reuters reported Noguchi as saying at a news conference. FX strategist and finance consultant at Keystone, Francis Fabrizi “USD/JPY has increased its bearish momentum after falling from 140.600 yesterday and breaking below the ascending trendline seen on the weekly timeframe.” “This morning it is attempting to reach the 134.650 support level. If it is successful in dropping below this level, 132.000 will be the next target level, indicating the end to the current bullish trend.” “If the price is unable to break and hold below 134.650, I believe we will see a pullback towards 138.000.” Service and wage pressures are yet to see a bump. Meanwhile, the prevailing BOJ orthodoxy remains: Governor Haruhiko Kuroda is deeply resistant to pull stimulus measures until limping domestic demand and wage growth meaningfully climb. Capital fx market specialist Piero Cingari says stretched levels in the USD/JPY daily chart are clear enough. “The RSI is detecting oversold once more, and the 200-day moving average is only 1.5% below current levels.”
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