News & Analysis

FX Analysis – USDCAD, USDJPY, AUDUSD

19 December 2023 By Lachlan Meakin

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FX traders have some tier one data releases to look forward to today, including the last major central bank meeting in the form of the Bank of Japan. RBA monetary policy minutes and Canadian CPI also having market moving potential.

 AUDUSD

The Aussie was modestly in the green in Monday’s session after initial strength that saw it outperform G10 rivals in the European morning faded later in the session. AUDUSD supported by further PBoC liquidity and a firmer Yuan fix early on. A mixed risk sentiment in the US session saw it hit resistance at the 4-monthth highs of 0.6735 and reversing course to a low of 0.6690.

RBA minutes released at 11:30 AEDT have the potential to see an RBA pushback against the market’s view that rates have definitely peaked, lending a tailwind to the Aussie.

USDCAD

USDCAD edged higher in Monday’s session but held near its four month lows, rising oil prices amid heightened Red Sea tensions tempering losses in CAD with traders awaiting today’s CPI inflation data. Economists expect the Canadian CPI to show inflation slowing to an annual rate of 2.9% in November from 3.1% in October. The Bank of Canada has left the door open to further rate hikes, so this reading will be a pivotal one to test that narrative.

USDJPY

The much anticipated Bank of Japan could see some big swings in JPY as investors look for clues as to when the central bank foresees the end to its easy money policies. Bank officials have recently pushed back against rate hike expectations for this meeting. But with traders pricing in the end of negative rates in January, the language at this meeting will be key for the short-term performance of the yen. A hawkish surprise could push USDJPY towards the 140 handle, an unchanged message could bring the cross back up to the 145 level.

 

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