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CADJPY: ⬆️ Buy

– CADJPY reversed from support zone

– Likely to rise to resistance level 115.00

CADJPY currency pair recently reversed up from the support zone between the support level 113.80, which has been reversing the price from March, lower daily Bollinger Band and the support trendline of the daily down channel from May.

This support zone was further strengthened by the 61.8% Fibonacci correction of the upward impulse from February.

Given the clear daily downtrend, CADJPY can be expected to rise to the next resistance level 115.00, that stopped earlier minor correction 2 at the start of June.

The US personal consumption expenditures price index (PCE), Fed’s preferred inflation gauge, rose 4.1% y/y in May from unrevised 3.8% previous month, in line with expectations.

May’s figure shows the largest increase and the first break above 4.0% in over three years, with inflation moving further from the central bank’s 2% target, adding to growing bets for Fed rate hike, as early as September.

Core PCE index that excludes the most volatile food and energy components, increased 3.4% y/y in May after rising 3.3% in April, also meeting forecasts.

The Fed kept its benchmark overnight interest rate in the 3.50%-3.75% range at the policy meeting last week, but updated quarterly projections showed policymakers expected to raise borrowing costs this year amid growing concerns about inflation.

Economists expect inflation, sparked by the US/Israel war against Iran, to stay elevated for some time despite the latest drop in oil prices due to a ceasefire and initial peace deal which continues to fuel optimism.

Separate report showed that consumer spending, which accounts for more than two-thirds of economic activity, jumped 0.7% in May compared to 0.4% rise in April.

The data also showed that consumers have maintained their spending, as larger tax refunds and stock market rally have partially compensated negative impact from higher fuel prices.

Although rise in spending reflects higher prices, May data also signal that consumption might be on track to speed up in the second quarter after slowing in the first three months of the year.

• Following a flat reading in April, personal income rebounded by 0.7% month-over-month (m/m) in May, ahead of market expectations for a 0.4% gain. The gain was driven by a firming in wages and salaries, and an increase in farm proprietors' income, reflecting an increase in payments from the American Relief Act of 2025.
• After adjusting for inflation, taxes, and transfers, real disposable personal income rose 0.3% m/m, partially reversing a 0.5% decline the prior month.
• Consumer spending rose 0.7% m/m in nominal terms, slightly ahead of expectations. Higher prices were part of the story, but not all of it. Real spending rose by a healthy 0.3% m/m.
• Looking across the broad categories, goods spending rebounded, rising 0.5% m/m in real terms. Spending on durables strengthened on the month, supported by higher outlays on motor vehicles and parts (+0.9% m/m), recreational goods and vehicles (+0.8%), and furniture and household equipment (+1.2%). Spending on non-durables was also higher (+0.3%), even as households purchased less gasoline for a third consecutive month. Services spending edged up 0.2% m/m, supported by higher outlays on necessities such as housing, healthcare, and financial services, while consumers cut back on food services and accommodation as well as transportation.
• With income growth keeping up with spending this month, the personal saving rate held steady at four-year low of 3.0%.
• Inflationary pressures remained firm on the month. Core PCE—the Fed’s preferred inflation gauge—rose 0.3% m/m, in line with the prior month and with the average monthly increase so far this year. The twelve-month change accelerated to 3.4%, up slightly from 3.3% last month.

Key Implications

• Today’s report brought some welcome news on the health of the consumer. Both spending and income both rebounded, marking a clear improvement from the prior month. While the revisions made the savings rate look slightly less dire than it did a month ago, it's still sitting at the lowest level in roughly four-years, suggesting household spending capacity remains limited. This is evident in spending data, where consumers have had to start making some tough choices in recent months, by reducing travel and lodging expenses, and cutting back on dining out in an effort to stay within budget.
• Looking ahead, the worst of the gas price increases seems to be in the rear-view mirror, and households should get some modest reprieve from lower prices at the pump in June. The labor market also appears to be showing some signs of strengthening, while household wealth continues to be supported by rising equity valuations. This should help to sustain consumer spending at around a 2% pace through year-end.

• Monetary policy divergence is weighing on EURUSD.
• Europe has always recovered from crises.

The US dollar is on track to close the month with its biggest gain since July last year, thanks to the Fed’s hawkish shift, gloomy European PMI figures and Christine Lagarde’s dovish comments. As a result, the yield spread between US and German bonds is widening, triggering capital outflows and contributing to the fall in EURUSD over 5 of the last 6 trading days.

In recent years, Europe has been in a state of constant upheaval. COVID-19, the armed conflict in Ukraine, the energy crisis, the political crisis in France, Donald Trump’s tariffs, and, finally, the conflict in the Middle East have all weighed on European households’ sentiment, reinforcing their tendency to save. In 2025, they were saving 15 per cent of their disposable income, compared with 12.5 per cent before the pandemic. In contrast, in the US, the figure has fallen over this period from close to 7% at the start of 2020 to 2.6%, according to the latest April data. Since 2019, US consumption has risen by 18%, whilst that of Europeans has risen by only 5.5%. This is precisely what explains the persistent lag in eurozone GDP growth.

To boost Europe’s GDP growth, domestic demand needs to be stimulated; however, this is being hampered by a never-ending series of shocks. Due to the conflict in the Middle East, the currency bloc’s economy is teetering on the brink of contraction and may well slip into negative territory in the second quarter. Consequently, investors were sceptical that the ECB could raise rates aggressively. Now that oil prices are falling, there is no need to do so. Christine Lagarde’s cautious tone on further hikes is understandable.

However, every sunset is followed by a sunrise. Eurozone GDP has rebounded strongly since the pandemic, and the region’s economy has proved far more resilient to US tariffs than anticipated. Friedrich Merz’s fiscal stimulus measures have raised hopes of rapid growth. Each time, the EURUSD pair has rallied. The end of the conflict in the Middle East and the associated fall in oil prices are creating a springboard for a new surge.

For now, the euro is being dragged down by a ‘hawkish’ surprise from Kevin Warsh. The futures market is pricing in a 65% probability of a Fed rate hike in September and estimates a 47% probability of two rounds of monetary tightening in 2026. However, if the surge in US inflation proves temporary, the figures will fall, and the EURUSD pair will find its footing. The first signal may come from the PCE.

The FxPro Analyst Team

Global forex markets turned notably quieter on Thursday as major currency pairs and crosses consolidated within Wednesday's ranges. The pause came despite a sharp improvement in risk sentiment after Micron delivered blockbuster quarterly earnings, easing concerns that this week's technology selloff had marked the beginning of a broader unwind in the AI trade. Asian equities responded enthusiastically, with Japan's Nikkei surging 4.61% and South Korea's KOSPI jumping 5.42%, leaving both indices back near the record highs reached only days earlier. US equity futures also pointed higher, though with considerably less conviction.

Currency markets, however, were far less impressed. The latest batch of US data, particularly May's PCE inflation report, reinforced the Federal Reserve's concerns over sticky price pressures and did little to weaken expectations for further policy tightening. With inflation remaining well above target and consumer spending staying resilient, September increasingly looks like the most likely timing for the next Fed rate hike.

Some major institutions are also forecasting another increase in December, while the most hawkish forecasts now call for three hikes in September, October and December. Against that backdrop, the Dollar continued to hold onto this week's gains even as risk appetite recovered.

The strength of the Greenback has left its mark across markets. Gold has broken decisively below the key $4,000 psychological level, while Silver has fallen through $60 as investors reassess the outlook for US interest rates.

In the currency space, Dollar remains the week's strongest performer. Yen ranks second, with USD/JPY once again pressing against the multi-decade high at 161.94, bringing the risk of Japanese intervention back into focus. Sterling is the third-best performer, with markets appearing to welcome Prime Minister Keir Starmer's resignation.

At the other end of the rankings, New Zealand Dollar remains the weakest as falling oil prices reduce the urgency for further RBNZ tightening. Aussie is the second weakest after inflation, employment and spending data painted a mixed picture that keeps an August RBA hike possible but far from certain.Euro, Swiss Franc and Loonie are trading in the middle of the pack.

With no further top-tier economic releases due before the weekend, trading activity may remain subdued as investors turn their attention toward July and next week's US non-farm payrolls report.

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USD/JPY Daily Outlook

Intraday bias in USD/JPY remains neutral for the moment. On the downside, firm break of 160.58 support should confirm short term topping, on bearish divergence condition in 4H MACD. Deeper fall should then be seen to 55 D EMA (now at 159.46) and below. Nevertheless, decisive break of 161.94 high will resume the larger up trend to 100% projection of 152.25 to 160.71 from 155.01 at 163.47 next.

In the bigger picture, for now, corrective pattern from 161.94 (2024 high) is still seen as completed at 139.87. Rise from there is seen as resuming the long term up trend. This will remain the favored case as long as 55 W EMA (now at 155.17) holds.

The Federal Reserve's preferred inflation gauge accelerated in May as both consumer spending and personal income exceeded expectations, reinforcing the picture of a resilient US economy facing persistent price pressures. Personal income rose 0.7% mom, well above the expected 0.4% increase after being flat in April, while personal spending also advanced 0.7% mom, topping forecasts of 0.6% and accelerating from April's 0.4% gain.

Inflation remained elevated across both headline and core measures. The PCE price index rose 0.4% mom, slightly below the expected 0.5% increase, while the annual rate accelerated from 3.8% yoy to 4.1% yoy, matching expectations. Core PCE, which excludes food and energy, increased 0.3% mom as expected, lifting the annual rate from 3.3% yoy to 3.4% yoy, the highest since October 2023. The data suggest underlying inflation remains sticky despite some moderation in monthly price growth.

Taken together, the report is likely to reinforce expectations that the Fed will maintain a hawkish stance. Strong income growth continues to support consumer spending, while inflation remains well above the central bank's 2% target. The combination of resilient demand and persistent underlying price pressures is unlikely to provide policymakers with sufficient confidence that inflation is moving sustainably lower, keeping the prospect of further policy tightening firmly on the table.

Full US personal income and outlays release here.

US durable goods orders fell -4.5% mom in May, a smaller decline than the expected -4.7% drop, as a sharp pullback in transportation equipment orders offset continued strength elsewhere in the manufacturing sector. The decline followed April's 8.5% surge and was driven by a -14.0% fall in transportation equipment orders to USD 113.5B. Excluding transportation, however, durable goods orders rose a solid 1.3%, comfortably beating expectations for a 0.5% increase.

The underlying details pointed to resilient business demand despite the volatile headline figure. Orders excluding defense declined -4.6%, reflecting the weakness in transportation, while the broad gain in orders outside the transportation sector suggests manufacturers continue to see healthy underlying demand. The report indicates that May's decline was more of a normalization following two months of exceptionally strong transportation orders rather than a broad-based deterioration in factory activity.

Manufacturing activity also remained supported by solid production. Shipments of durable goods increased 1.0% mom to USD 327.9B after a 0.7% gain in April, marking the eighth increase in the past nine months. Transportation equipment again led the advance, with shipments rising 1.4%. Overall, the report points to continued resilience in the manufacturing sector, with core demand and shipments remaining firm even as the highly volatile transportation category weighed on the headline reading.

Full US durable goods orders release here.

US initial jobless claims fell more than expected last week, offering fresh evidence that layoffs remain limited despite signs of a gradual cooling in the labor market. Initial claims dropped by -12k to 215k in the week ended June 20, beating expectations of 225k. The previous week's reading was revised to 227k. Meanwhile, the four-week moving average, which smooths weekly volatility, edged up by 750 to 224,250.

The picture was somewhat more mixed beneath the headline. Continuing claims, a proxy for the number of people receiving unemployment benefits, rose by 21k to 1.821m in the week ended June 13, while the insured unemployment rate held steady at 1.2%. The four-week moving average of continuing claims also increased by 9k to 1.7945m, suggesting unemployed workers are still taking slightly longer to find new jobs.

Full US jobless claims release here.

Intraday bias in EUR/USD remains on the downside at this point. Sustained break of 1.1353 fibonacci level will carry larger bearish implication. Next near term is 100% projection of 1.2081 to 1.1408 from 1.1848 at 1.1175. On the upside, above 1.1416 minor resistance will turn intraday bias neutral again first.

In the bigger picture, focus is back on 38.2% retracement of 1.0176 to 1.2081 at 1.1353. Decisive break there will revive the case of medium term bearish trend reversal after rejection by 1.2 key cluster resistance level. Further fall should be seen to 61.8% retracement at 1.0904. Nevertheless, strong rebound from 1.1353, followed by break of 1.1621 resistance, will retain medium term bullishness.