• USD/JPY hovers near a critical support zone ahead of NFP data

• AUD/USD rally stalls near caution area before RBA rate decision

• USD/CAD hopes for a rebound, but bullish outlook is not in sight

US jobs data, Japan CPI –> USD/JPY

It will be a busy week in the US markets as a batch of data are expected to shed some light on whether rate cuts are possible in the middle of next year. The calendar includes the all-important nonfarm payrolls report on Friday, while the ISM non-manufacturing PMI, the JOLTs job openings, and the weekly initial jobless claims might provide some insights on the labor market earlier in the week.

Better-than-expected figures are needed to ease rate cut projections following the surprising dovish comments by the hawkish Fed Governor Waller last week, and thus protect USD/JPY from a bearish breakout. The pair is currently trading near the critical 146.50 level and at the bottom of a broad downward-sloping channel. If that floor breaks, the price could slump towards its previous highs and lows registered within the 144.50-145.00 region. Another defeat there could cause a sharp selling towards the 200-day simple moving average (SMA) at 142.20.

On the upside, the 148.00-149.60 area might keep downside risks intact. Traders will need a bold rebound in jobs data to drive the pair towards its 2022-2023 ceiling of 151.93. NFP forecasts are currently optimistic for a moderate employment increase to 180k from 150k previously, but the unemployment rate and average hourly earnings might provide a better picture of the economy and the effects of rate increases.

Japan’s CPI and GDP growth figures due on Tuesday and Friday respectively could be important market movers too, as investors remain confident that a shift to a more hawkish monetary policy is still likely.

RBA policy meeting –> AUD/USD

The Australian dollar has been outperforming its US counterpart over the past three weeks and the question that comes next is whether the RBA’s policy announcement on Tuesday will add more fuel to the bull run.

The central bank kept the door open to additional rate increases in November, but with some skepticism. Inflation is moving in the right direction towards its 2.0% midpoint target, though at a gradual pace, while the pickup in wage growth in Q3 increased fears of persisting inflation pressures. Therefore, policymakers might have a tough time in signaling the end of the tightening cycle this week.

Australia’s GDP data on Wednesday and China’s trade and inflation figures could create more volatility in AUD/USD later in the week. Technically, the pair has been struggling to close decisively above a long-term resistance trendline at 0.6655, increasing the risk for a bearish reversal. If the bulls win, the price could advance to 0.6715 and then head for the 0.6800 mark. Otherwise, the spotlight will fall again on the 200-day SMA at 0.6565.

BoC policy meeting –> USD/CAD

The Canadian central bank will hold its last policy meeting for the year on Wednesday. Investors are certain that interest rates will remain unchanged at 5.0% for another month, but they will look for any signs the rate hike cycle has peaked given the latest disappointing employment and GDP readings.

USD/CAD is trying to recoup Friday’s losses, which sent the pair below the 200-day SMA for the first time after four months. If the bullish efforts fail, the pair could seek support somewhere between 1.3430 and 1.3400. Even lower, the decline could halt around the 1.3290 constraining zone.

Alternatively, a move higher may not excite traders unless the price crosses back above 1.3650, and more importantly, surpasses the 1.3700-1.3750 cautionary territory.