The US dollar has entered a consolidation phase following last week’s sharp decline. The pace of dollar weakness has slowed noticeably, while trading activity remains subdued amid the holiday period and limited market participation. Against the backdrop of low liquidity, the market is showing caution: new positions are being opened reluctantly, and price action in major currency pairs is increasingly driven by short-term flows and local impulses rather than by sustainable fundamental trends.

The fundamental backdrop remains mixed. On the one hand, the current week is relatively light in terms of major news, which in itself supports range-bound trading. On the other hand, today and tomorrow a series of US macroeconomic releases is due, including data on the housing market, business activity and retail sales, as well as reports from the energy sector. These releases may temporarily increase intraday volatility; however, in conditions of low liquidity, market reactions could be fragmented and not always consistent.

USD/JPY

Last week, USD/JPY fell sharply after rebounding from the 157.70 area. Technical analysis of USD/JPY points to the potential for further downside, as a bearish harami pattern has formed on the daily chart. Nevertheless, amid reduced liquidity, the price has found short-term support near 155.60. A rebound from this level could trigger a corrective move towards 156.70.

Key events for USD/JPY:

• today at 16:00 (GMT+2): U.S. S&P/CS HPI Composite-20, seasonally adjusted;
• today at 16:45 (GMT+2): Chicago PMI;
• today at 21:00 (GMT+2): FOMC Meeting Minutes.

USD/CAD

The decline in USD/CAD has slowed just above the 1.3600 level. Yesterday, a bullish engulfing pattern was formed on the daily timeframe, the completion of which could support a recovery towards the 1.3700–1.3750 range. Failure to move above 1.3700 over the next few trading sessions may result in a renewed test of the recent low near 1.3640.

Key events for USD/CAD:

• today at 18:30 (GMT+2): US crude oil inventories;
• tomorrow at 15:30 (GMT+2): US initial jobless claims;
• tomorrow at 20:00 (GMT+2): U.S. Baker Hughes Total Rig Count.

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