Stock Markets Continue to Slide, BoC Delivers a Hawkish Double Hike

Tightening Expectations Keep Driving the Markets, BoC Stays Hawkish

The US dollar traded higher against all but two of the other major currencies on Wednesday and during the Asian session Thursday. It gained the most versus GBP, JPY, and EUR, in that order, and the least versus NZD and CHF. The greenback did not lose against any other major currency, but it was found virtually unchanged against AUD and CAD.

EUR/CAD — Technical Outlook

EUR/CAD traded lower yesterday, after it hit resistance at the 1.3590 zone. The slide was stopped by the 1.3445 barrier, slightly below the lows of May 18th and 19th, and then, the rate rebounded. However, it is still trading below the downside resistance line drawn from the high of May 24th, which keeps the short-term outlook still negative.

USD/JPY — Technical Outlook

USD/JPY has been in a flying mode since Monday, while on Tuesday, it crossed above the downside resistance line taken from the high of May 9th. In our view, this was the result of market participants removing from the table bets that the FOMC may take a break after the summer, which could widen even more the monetary policy divergence with the BoJ.

As for Today’s Events

We will pay extra attention to the US ADP employment report for May, ahead of Friday’s official employment report. Though not a major market mover, and not a perfect gauge of the NFPs, it is the best we have. Expectations are for the private sector to have added 280k jobs during the month, after adding 247k in April. This is positive, and although the forecast the NFPs is for a slowdown, the actual figure is expected at 320k, which in our view, taking into account the continuous tightening of the US labor market, is still a decent number.

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