Forex Markets Tread Water as Impact of Oil Rally Fades

Market overviews

The forex markets remain relatively quiet in Asian session today. Canadian Dollar surged briefly yesterday as lifted by rally in oil price. WTI crude oil remains firm in at 65.80, after rising on news that US is ending Iranian oil sanction wavier for eight countries. But the boost to the Loonie is rather brief while it turns soft ahead of BoC meeting later in the week.

As for today, Yen is the strongest one so far as Asian markets turn soft coming back from holiday. Sterling follows as the second as yesterday’s selloff lost momentum. Dollar is third with some support from rebound in US yields. Nevertheless, 2.6 remains a hurdle to overcome for 10-year yield. Australian, Canadian and New Zealand Dollar are the weakest.

Technically, both USD/JPY and EUR/JPY breach 111.69 and 125.61 minor supports today. But there is no following through selling. EUR/USD’s recovery also lost steam just ahead of 4 hour 55EMA. The three-way actions will remain in focus today.

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In other markets, Nikkei is down -0.24%. Hong Kong HSI is down -0.22%. China Shanghai SSE is down -0.72%. Singapore Strait Times is down -0.15%. Japan 10-year yield is down -0.0036 at -0.03, staying negative. Overnight, DOW dropped -0.18%. S&P 500 rose 0.10%. NASDAQ rose 0.22%. 10-yeary yield rose 0.030 to 2.590.

Maeda: BoJ ready to use combinations of measures to ease further if needed

Eiji Maeda, BoJ Executive Director of International Affairs, reiterated the central bank stands ready to ease monetary policy further if needed.

He said in the Diet that “if the economy’s momentum for achieving our price target is threatened, we are ready to ease monetary policy as necessary”. And, “we’ll continue to take steps as needed, including a combination of them, with an eye on their effects and side-effects” on the financial system.

Separately Finance Minister Taro Aso said there is no plan for the government to test a heterodox modern monetary theory. That is, countries issuing their own currencies can never run out of money”.

Japans sees little impact from end of Iran oil sanction waiver

Japan is seeing limited impact as US ends the Iranian oil sanction waiver for the country. Trade and Industry Minister Hiroshige Seko said in a regular press conference that Japan has been lowering its reliance on Iranian oil import, which only accounts for 3%. And, there is no need to tap the national oil reserve with decision of the US.

Though, he noted, “we will closely watch international oil markets and exchange views with Japanese companies involved in crude imports and may consider taking necessary measures.”

The US decision to end the waiver will force eight countries, including China, Greece, India, Italy, Japan, South Korea, Taiwan and Turkey, to switch their oil supplies from Iran to other countries, starting May 2.

On the data front

The economic calendar remains relatively light today. Eurozone will release consumer confidence. Canada will release wholesale sales. US will release house price index and new home sales.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.3322; (P) 1.3361; (R1) 1.3386; More…

USD/CAD is staying in consolidation from 1.3467 and intraday bias remains neutral first. More sideway consolidation could still be seen but upside breakout is expected sooner or later. On the upside, firm break of 1.3467 will confirm this bullish case and target 1.3664 resistance next. However, decisive break of 1.3250 will turn bias back to the downside for 1.3068/3112 support zone instead.

In the bigger picture, USD/CAD is staying well inside medium term rising channel (support at 1.3212). Thus, even though upside momentum and structure are unconvincing, further rise is still in favor. Decisive break of 61.8% retracement of 1.4689 (2016 high) to 1.2061 at 1.3685 and 1.3793 will pave the way to retest 1.4689 (2015 high). However, firm break of the channel support should indicate bearish reversal, after rejection by 1.3793, and bring deeper fall to 1.3068 support for confirmation.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
12:30 CAD Wholesale Trade Sales M/M Feb 0.10% 0.60%
13:00 USD House Price Index M/M Feb 0.60% 0.60%
14:00 EUR Eurozone Consumer Confidence Apr A -7 -7.2
14:00 USD New Home Sales Mar 647K 667K

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