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USDJPY briefly pushed above 145 in today’s session before a sharp pullback, with traders wary of recent jawboning from Japanese officials regarding the “one sided” trade in the Yen may be setting the Japanese MoF up for another round on FX intervention that we saw late in 2022. Some sharp moves in the Yen in the last day have had traders speculating the MoF may have already intervened on a small scale but there was no official confirmation of intervention, MoF officials said they have no comment on the matter, but “they are mindful of the one-sided moves”. Looking at a close up of last years price action in the USDJPY may give traders a clue as to what to expect, with minor interventions seeing USDJPY spike lower, only to rise again until a major intervention or surprise policy change sustains a move lower in the cross rate.

This is a fairly predictable scenario from my experience with JPY interventions over the years. Any USDJPY traders would be wise to be familiar with the price action from these previous intervention efforts.

The USD/CAD pair experienced a relatively uneventful session after Bank of Canada (BoC) decided to keep interest rates on hold. However, what caught the attention of traders was the hawkish tone in the central bank's language. Similar to many central banks globally, the BoC is cautious about raising rates further until they thoroughly assess the inflation landscape.

Still, they've left the door open for potential rate hikes in the future. Surprisingly, this hawkish stance from the BoC didn't have a significant impact on the Canadian dollar against the US. The strength of the US dollar remained dominant, keeping the USD/CAD pair relatively flat during the session.

Currently, the pair finds itself at a crucial resistance level, which it has unsuccessfully attempted to breach three times since April. The BoC's hawkish language appears to have halted the pair's upward momentum, preventing a breakout, but wasn’t enough to push the pair south. Since mid-July, the USD/CAD pair has experienced an impressive 4% surge, driven by a resilient US dollar and the US Federal Reserve's commitment to maintaining higher interest rates to combat inflation.

However, from the technical view, a slightly bearish divergence is forming on the daily RSI, indicating the move might be running out of steam and a potential correction could be on the cards. In this high inflation environment, the pair's direction will likely hinge on crucial upcoming data releases in the weeks ahead. In addition to the technical setups, traders should keep a close watch on the fundamentals to help navigate potential shifts in direction.

The US Dollar Index (DXY) has closed its fourth consecutive day in the red, reaching levels last seen in early May 2023. Despite the recent decline, the DXY is coming into support around the 100 level, which has proven to be a resilient bounce point multiple times. However, each bounce appears to be getting smaller, which might indicate growing downward pressure.

This support level adds an interesting dynamic to the market as traders watch for potential price reaction. Todays US CPI print may hold the key to determining the DXY's future trajectory. If the CPI data is reported higher than expected, it could potentially fuel speculation of tighter monetary policy by the Federal Reserve.

In such a scenario, we might see the DXY experiencing a short-term rebound, as higher interest rates tend to attract investors seeking stronger returns. On the other hand, if the CPI data comes in lower than expected, market participants might interpret it as a sign that the US Federal Reserve will maintain its current pause in interest rate hikes during their upcoming FOMC meetings. If that occurs, it could potentially exert downward pressure on the US Dollar.

A more accommodative monetary policy stance may reduce the attractiveness of the USD to investors seeking higher yields, leading to a potential decline in its value against other currencies and potentially sending the DXY below 100 for the first time since early 2022. US CPI will be released at 08:30 EDT, YoY is expected to come in at 3.1%, with MoM expected at 0.3%

The current market consensus is that the Reserve Bank of New Zealand (RBNZ) would likely keep interest rates at 5.50% at the upcoming meeting on 12th July. This is supported by the RBNZ’s monetary statement indicating that “ monetary policy is having a sufficiently moderating effect on demand and inflation, and that we are yet to see the full effects of past tightening on the economy. A pause would also allow more time to assess the impact of the significant tightening, and the timing of any further increase that might be needed.” However, while the Consumer Price Index (CPI) has turned down from its peak of 7.3%, the most recent data was released at 6.7%, this is still significantly higher than the RBNZ’s target level of 1-3%.

Therefore, another rate hike from the RBNZ cannot be ruled out. In May, the RBNZ released its decision to hike rates to 5.50% but also indicated that the official cash rate has reached its peak at 5.50% but would need to remain at the restrictive level until at least the middle of 2024. This led to the NZDUSD falling steadily from 0.6250 to reach the round number support level of 0.60.

As the NZDUSD climbs toward the 0.6250 price area, formed by the previous swing high and the downward trendline, look for a potential reversal if the RBNZ holds interest rates at 5.50% as forecasted. A reversal to the downside could reach the price level of 0.61, supported by the upward trendline, and beyond that, the 0.60 round number key support level.

Todays NFP figure out of the USA is shaping up to be a pivotal moment in market expectations as to whether we’ve seen peak rates from The Federal Reserve, or if there is more to come and the ramifications that will have for the FX market. NFP figures are always interesting, traditionally the biggest market moving figure of the month on the US calendar, and against the backdrop of the Feds “data dependent” messaging regarding future rate moves this figure will be a big piece of how the market prices in the result of the September Fed meeting. Currently markets are butting heads with the Fed, only pricing in a higher chance of no more hikes from the Fed, despite Fed guidance and dot plots indicating they are looking at least one more hike this cycle.

Current September Fed Fund Future odds are showing only a 17.5% of a hike in the September meeting. Source:CME Fedwatch tool Market expectations are for a slowing in payroll growth in July the consensus being 200k nonfarm payrolls to be added to the US economy in July, slightly cooling from the 209k added in June, with the unemployment rate expected to remain unchanged at 3.6%. A big beat or miss on these expectations, a rapid repricing of hike/hold odds would be likely to see volatility and opportunities in FX markets.

Chart to watch: US Dollar Index (DXY) DXY has rallied strongly since mid-July as the UST 10 Year yields pushed higher and getting an extra boost from some risk-off this week in equity markets which pushed DXY through the S/R level at 102. DXY found resistance at its upper trend line at around the 102.84 level, seeing some of the recent gains being pared. Also an important factor is the close relationship between US10 yields and DXY, the yields now above 4% where they have struggled to go any higher in the recent past, this will also see a headwind against DXY pushing higher from this level.

The levels to watch over todays NFP will be 102.84 to the upside on a big beat, 102 as support to the downside if we get a big miss. Both of those levels will be key in the next trend direction of DXY. Calendar:

The Nasdaq Composite Index has kicked off 2023 with a historic performance, achieving its most impressive start since 1975. Despite concerns about a potential recession, the index has displayed remarkable resilience, surging over 37% year-to-date as of the end of July. The upward trend has been consistent, with green months recorded in 6 out of the 7 months of the year so far.

With only 13.50% more to run before it gets back to all time highs set in November 2021, it will be interesting to watch how this plays out over the second half of the year. From a technical standpoint, traders are closely monitoring the current price action within this crucial resistance zone. The market's reaction here will determine its short-term direction.

Will the resistance zone hold strong and push the price downward, or will the momentum be strong enough to break through and continue its journey toward all-time highs? Zooming out to the weekly timeframe, the Relative Strength Index (RSI) has been floating around overbought territory since mid-June. This confluence with the resistance zone indicates a possible cooling off period in the coming weeks.

This scenario wouldn't be overly surprising, as markets often experience a breather after significant surges.