– The Japanese yen fell on Friday after the Bank of Japan (BOJ) stood pat on its ultra-easy monetary policy. The U.S. dollar was on track for a second straight monthly loss despite finding some support from data pointing to still-sticky inflation in the United States, which reinforced expectations for a 25-basis-point rate hike at next week’s FOMC meeting. .
– The Commerce Department reported on Thursday that U.S. economic growth slowed by more than expected in the first quarter, while a separate report from the Labour Department on Thursday showed initial claims for state unemployment benefits decreased 16,000. The labour report suggested a still-tight labour market and also underpinned next week’s rate increase expectations.
– In a closely watched decision, the BOJ on Friday announced it will maintain ultra-low interest rates, as expected, and made no tweaks to its yield curve control by a “unanimous vote”. However, the BOJ said it will remove forward guidance that pledges to keep interest rates at current or lower levels.
– The yen slid in volatile trade following the decision, and was last 0.5% lower against the dollar at 134.60. Sterling slipped 0.06% to $1.2492. The euro fell 0.1% to $1.1016, but remained near its recent one-year high.
– Gold prices fell slightly on Friday, extending losses into a third straight session as stronger-than-expected U.S. inflation and labour market data saw fears of more Federal Reserve rate hikes come back into focus.
– There will be no Forex Commentary for the next 3 weeks. Update will resume on 22 May.
Chart Focus USD/CAD
1. Buy USD/CAD recommendation.
2. Buy USD/CAD at 1.3605. Stop at 1.3570 and profit target at 1.3725.
3. A Fed rate hike next week and declining crude oil prices are both weighing on the Canadian dollar.
4. Price is likely to be supported by the 20EMA line with MACD hinting at a bullish price trend.
1. US labour overnight is suggesting a still-tight labour market and a likely rate hike in next week FOMC meeting.
2. The Canadian dollar is likely to be weighed down by a second weekly decline in crude oil price.
1. Price is likely to be supported by the 20EMA line, which is also hinting at a bullish price trend.
2. MACD remains bullish and is hinting at a bullish price trend.
USD/JPY – We saw a price rally to a high of 134.92 this morning after Bank of Japan maintained its ultra-easy monetary policy after its monetary meeting. Stochastic is hinting at a continuation of this price rally. MACD and 20EMA are also hinting at a continuation of the price rally. If price can move above 135.13, we are likely to see a test of 137.90 in the next few days.
EUR/USD – We had a buy recommendation on Tuesday at 1.0995 and had recommended placing stop at 1.0960 and profit target at 1.1075. Our profit target was met when price reached a high of 1.1094 on Wednesday. A divergence at the price high is hinting at a price decline to 1.0985 in the next few days. Stochastic is also hinting at a price decline. However, MACD remains bullish and is hinting at a price rally.
GBP/USD – We had a sell recommendation on Wednesday but our call was wrong. Price went to a high of 1.2515 taking out our stop. MACD is hinting at a loss of momentum in the rally but stochastic is still pointing to a price rally. 20EMA is supporting the stochastic and calling for a price rally. However, we think price is likely to stay in a sideways range for the next 24 hours.
XAU/USD – Price failed to move higher and test its resistance at 2012.35 and we have seen price tested the support at $1973.95. Price has also moved below the 20EMA and we are likely to see another move to test the previous low at $1969.15 in the next couple of days. Stochastic is hinting at a price decline. Both MACD and 20EMA are hinting at a bearish price trend in the next few days.
EUR/AUD – Price reached a high of 1.6784 on Wednesday and the decline has reached a low of 1.6603 this morning. The low was supported by the 20EMA line and if this support holds, we are likely to see price test the previous high again at 1.6784 in the next few days. Stochastic is neutral but MACD is hinting at a bullish price trend. 20EMA is also hinting at a price rally. A Price move below 1.6525 would negate our bullish price view.