The Bank of Canada was the headline in the FX market last week. Their interest rate announcement broke from the other G7 central banks, when they decided to cut their bond purchases by 25%, and stated that interest rates would remain low unless inflation moved to 2%. Most economists expect that to be Q3/4 of 2022.  The Harris/Biden administration announced their tax plan which included a hike in capital gains taxes for those making over $1MM. Equity markets bounced around following the political agenda and did end the week on a high note. The USD Index has moved into what can be called a consolidation pattern. This may mean little new ground gained or lost in its overall trend. This does ultimately lead to the continuation of the recent trend and the case of the USD that direction looks lower.

Calendar: Durable Goods, FOMC, GDP, Pending home sales, Personal Income/Spending, Chicago PMI, Michigan Consumer, Sentiment

EUR (1.2110): The week has already begun with the EUR trading higher, now above 1.2100. The trend in April has been in one direction with the EUR quietly gaining strength against the USD as well as the GBP. Resistance: 1.2180, 1.2250; Support: 1.2070, 1.2000

Calendar: German IFO, German Employment, German CPI, German GDP, Consumer

GBP (1.3900): Last week was a volatile one for the pound where early on saw solid buyers which faded as the week ended, with the currency weakly moving sideways. Dragged up by the early strength of the EUR, the GBP has moved higher to begin this week, but has not yet established a solid trend. Resistance: 1.3935, 1.3985; Support: 1.3830, 1.3790

CAD (1.2450): USD/CAD is under pressure after the Bank of Canada announced their plan with bond purchases and ultimately a possible rate hike. This changed the market for short, medium and long-term. We have called for the USD to continue to move toward 1.2000 with the first target at 1.2200. Resistance: 1.2500, 1.2560; Support: 1.2400, 1.2360

Calendar:  Retails Sales, GDP, RMPI

JPY (107.70): USD/JPY weakness continues for the third straight week! Two things had been in the USD/JPY favor: its inherent cheap funding and the rising 10-year yield in the U.S. Well, the cheap funding has not changed but the yield has reversed and fallen back to 1.55%, which is the currency markets excuse for the rally in the Yen! Resistance: 108.20, 108.50; Support: 107.50, 106.96

Calendar: BOJ Rate decision

MXN (19.8000): The Mexican peso has really fallen into a dull, sideways action. We had been targeting 19.8500 as a support level and target for several weeks. There has been little follow-through and little reason to believe the USD will do anything but go lower against the MXN. Resistance: 19.95, 20.25; Support: 19.50, 18.50

Calendar: IGAE economic activity

CNY (6.4850): The CNY gained strength on overall US dollar weakness and this will continue as dollar weakness picks up momentum. We always need to keep in mind that a currency pair is two different parts. There are periods when data, news etc. relates to one variable and another time the news impacts the other. That is the difficulty with the largest economies attempting to lead global change. Resistance: 6.5000, 6.5500; Support: 6.4500, 6.3800