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Weekly Technical Outlook – USDJPY, GBPUSD, USDCAD

  • Strengthening rate cut projections weigh on USDJPY; upward pattern intact above 151.90

  • GBPUSD faces rejection near familiar resistance of 1.2630 ahead of BoE policy announcement

  • USDCAD trends within a short-term bearish channel; key support level at 1.3530


Intervention risks, Fed talk --> USDJPY

The week ahead will be light in terms of US data releases, but a couple of Fed speakers will be on the wires to comment on monetary policy and perhaps fuel fresh volatility in the greenback. Meanwhile in Japan, the central bank will release the summary of opinions from its April meeting on Thursday, likely providing some insight about the timing of the next rate hike.

Friday’s downbeat nonfarm payrolls report and weaker-than-expected services PMI increased the odds for two rate cuts in 2024 after Powell assured investors that no rate hikes will take place.

Despite the miss in the jobs data, USDJPY managed to rotate higher near the 50-day simple moving average, and more importantly, close above a familiar constraining line. Technically, a continuation higher is possible, but the pair will have to jump decisively above the wall at 157.83 in order to strengthen its positive outlook. Furthermore, due to the ongoing currency discussion in Japan, the possibility of intervention may continue to suppress buying interest. In any case, the short-term outlook may not worsen unless the pair slumps below 151.93.

Bank of England’s rate decision --> GBPUSD

Meanwhile in the UK, the Bank of England will review its rate policy Thursday, with the announcement scheduled to come out at 11:00 GMT. While no changes are expected to take place, it would be interesting to see if policymakers will further extend the timeline of rate cuts as the economy has started to show signs of recovery. Moreover, inflation remains comfortably above the central bank’s target despite trending down. Hence, a “higher-for-longer” outcome may not be very surprising.

In FX markets, GBPUSD has regained significant ground recently, though last week’s rejection near the familiar resistance line at 1.2630 and the pullback below the longer-term simple moving averages reflected insufficient buying interest. Yet, sellers might stay patient until the price tumbles below the 1.2500 floor before they take full control.

Canadian employment data --> USDCAD

The likelihood of a June rate cut is around 63% in Canada and Friday’s jobs figures will be the last employment report before the Bank of Canada meets in early June. Forecasts point to a stronger jobs growth of 20.9k and a slightly higher unemployment rate of 6.2%. Given the soft uptrend in the jobless rate, another pickup could support a rate cut sooner than later, especially as Canadian business and consumer insolvencies pick up pace.

Looking at USDCAD, the pair seems to be constrained within a short-term bearish channel. If Friday’s data disappoints, the price could meet the lower band of the formation at 1.3590. A break lower may not scare investors unless the price closes decisively below the long-term ascending line at 1.3530.

On the upside, the bulls should exit the channel above 1.3750 to activate fresh buying.

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