Canada’s January employment data in focus

The USD tended to edge higher against its counterparts yesterday in a rather quiet Thursday maybe with most gains being against the JPY which retreated after BoJ policymaker Shinichi Uchida, early in the Asian session of Thursday that “it’s hard to imagine” that rates would rise “rapidly”. BoJ’s ultra-loose monetary policy stance continues to be one of the main issues keeping the selling interest alive for the JPY and despite some hopes that the bank may proceed with a normalization of it monetary policy in the next month, market expectations had to be readjusted weakening the Japanese currency. On the other hand the Greenback may have drawn some support also from the lower-than-expected weekly initial jobless claims reading, which was released yesterday and tended to imply that the US employment market continues to be tight, an issue that provided substantial support for the USD a week ago as January’s employment data were released. We expect today’s fundamentals to lead the way for the USD given the absence of high-impact financial releases stemming from the US.

USD/JPY rose yesterday breaking the 148.55 (S1) resistance line now turned to support. Despite a relative stabilisation of the pair later on we tend to maintain a bullish outlook for USD/JPY as long as the upward trendline remains intact and given that the RSI indicator remains near the reading of 70 implying a bullish sentiment for the pair. Should the buying interest be renewed we may see USD/JPY breaking the 150.00 (R1) resistance line and aiming for the 151.85 (R2) resistance level. Should sellers take charge of the pairs’ direction we may see USD/JPY breaking the prementioned upward trendline, the 148.55 (S1) support line and start aiming for the 146.30 (S2) support base.

We highlight the release of Canada’s employment data for January. The release tends to gain additional interest as in various documents and policymaker statements, BoC highlighted the importance of the labour market as an underlying factor for the path of inflation which seems to be easing slowly. The unemployment rate is expected to tick up to 5.9%, from December’s 5.8% and the employment change figure to rise to 15k if compared to December’s practically stagnation. Hence the signals coming from the forecasts seem to be mixed and let’s not forget that forecasts have been disproven a number of times in the past for the particular releases adding an additional element of uncertainty which in turn may increase volatility for CAD pairs at the time of the release. Should the data show that the Canadian employment market remains tight, we may see the Looney getting some support as the release would provide more leeway for BoC to maintain rates high for longer and vice versa. On a more fundamental level we note that the rise of oil prices in the past few days may start providing also some inflows for the CAD.

USD/CAD hit a ceiling at the 1.3485 (R1) resistance line yesterday and was forced to maintain a range bound movement just below the R1. We maintain our bias for the sideways motion to continue given also that the RSI indicator remains close to the reading of 50 implying a rather indecisive market, yet note that the release of Canada’s January employment data may prove to be a game changer. Should the bulls take over, we may see USD/CAD breaking the 1.3485 (R1) resistance line and aim for the 1.3610 (R2) resistance level. Should the bears be in charge of the pair’s direction, we may see USD/CAD aiming if not breaking the 1.3365 (S1) support line, thus paving the way for the 1.3265 (S2) support level.

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Today in the European session, we note the release of Germany’s final HICP rate for January and Norway’s CPI rates for the same month, while also note that German BuBa President Nagel is scheduled to speak.