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The Week Ahead – Turning point?

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Chart

USDJPY falters over Japan’s rising inflation

Chart of USDJPY

As a result of rising inflation, the Japanese yen has seen an increase in value. The BoJ may be forced to act quickly. Japan’s monetary policy could become a major theme in 2023. Consumer prices have been rising steadily nationwide, with the latest CPI in Tokyo reaching 4%, above the central bank’s 2% target for seven months in a row.

The US dollar’s reversal from its 32-year peak against the yen suggests that the market believes that inflation is not transitory and has shrugged off Governor Haruhiko Kuroda’s dovish statements. Last May’s lows around 126.50 This is the next level of support. 134.50 This is the immediate resistance.

USDCAD struggles due to better risk sentiment

Chart of USDCAD

As markets become more risk-averse, the Canadian dollar recovers. A strong December jobs report in Canada gives cause for another rate hike by the Bank of Canada. The market has priced in a 25-bp increase. However, the overall sentiment since the start may have the risk-sensitive loonie. The US dollar is safe and can be used to fund a sustained recovery. However, higher beta counterparts could experience outflows. Meanwhile, the price of oil, one of Canada’s major exports, has settled in the green for a few days in a row,…



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