In a notable shift, the Japanese yen stands out as the sole G10 currency appreciating against the dollar during the European morning session. Yesterday, it was the sole G10 currency that experienced a decline against the greenback. The prevailing sentiment in the foreign exchange market remains one of consolidation. The significant outlier is the Chinese yuan. The onshore yuan appreciated for the 10th straight session, marking its longest rally since 2010, and achieved its highest value since April 2023. The North American session includes the release of US weekly jobless claims and the presence of two Federal Reserve officials on business television (Miran and Goolsbee), alongside Governor Bowman’s testimony to the Senate Banking Committee regarding Regulation. Canada is set to release its Q4 current account data, while Mexico will report its January unemployment figures prior to the central bank’s inflation report scheduled for this afternoon.

The euro exhibited strength, yet remained confined within the recent range yesterday. The session high in North America was noted at approximately $1.1815. It has established a position above the five-day moving average (~$1.1785 today) for the first time since February 11. Initial gains stalled today near $1.1830, just shy of this week’s high established on Monday around $1.1835. The downward trendline established from last month’s peak is positioned at approximately $1.18 today, coinciding with the expiration of options for nearly 2 billion euros today. The euro attracted buying interest late in the European morning session around $1.1790. The Japanese yen stood out as the sole G10 currency that failed to gain ground against the greenback yesterday. The appointment of two individuals viewed as dovish to the Bank of Japan validates market expectations that, in the quest for a more accommodating monetary policy, the prime minister favors a weaker yen. This appears to lessen the likelihood of intervention and encourage the market to probe for the pain threshold. Following yesterday’s increase, the US dollar achieved the (61.8%) retracement target from the decline observed since last month’s peak (~JPY159.45). The current trading range is relatively stable, fluctuating between approximately JPY155.70 and JPY156.45. Proximity support is identified around JPY155.50

In anticipation of today’s special election in the Gorton and Denton constituency, sterling reached a slight new six-session high today close to $1.3575, coinciding with the down trendline established from last month’s peak. Sterling retraced to $1.3520 at the start of the European session, subsequently discovering support. The 1.3590-1.3600 range presents a significant level of technical resistance. The Canadian dollar exhibited strength yesterday following a test of the month’s low on Tuesday. The US dollar retraced from CAD1.3725, settling around CAD1.3675. The greenback declined to a three-day low today, approaching CAD1.3660, just before the support range identified in the CAD1.3640-50 zone. A break could aim for the CAD1.3590-CAD1.3615 range next.

The January CPI print from the firm has enhanced expectations for a May rate hike by the Reserve Bank of Australia, propelling the Aussie to nearly $0.7125 yesterday. The peak was noted during late North American trading sessions. Today’s follow-through buying has pushed it slightly above $0.7135. Sellers appeared in advance of the $0.7145 level, coinciding with the expiration of options exceeding A$1 billion today. A three-year high noted earlier this month was slightly below $0.7150.