Major currencies are little changed for the most part as the yen takes a breather after its central bank dropped a festive bombshell on markets yesterday.

There’s not much doubt the timing of the Bank of Japan’s tweak to its policy was done for maximum effect.

Governor Kuroda has shocked the markets numerous times in his near decade tenure, and this was right up there with his finest!

Stumbling markets had fallen for a second consecutive week on Friday after investors heard hawkish messages from the feast of central bank meetings.

Expectations had been set that interest rates would remain higher for longer even though inflation and economic data has started to turn lower.

The EURUSD currency pair on the Weekly (W1)  time frame was in an exceptionally long downtrend until a last lower bottom formed on 25 September at 0.95347.

The USDCAD on the D1 time frame was in an uptrend until 13 October when a last higher top was recorded at 1.39760.

A closer look at the Momentum Oscillator reveals negative divergence between point “a” and “b” when comparing the tops at 1.38338 and 1.39760. This could have alerted technical traders that the bulls might be getting tired.

The risk-off mood from the new surge in Covid infections in China saw a bid in the greenback. This offset the Fed speakers on the wires who were less hawkish than recent chatter.

It seems the dollar has been reasserting its safe haven status among its peers recently, over and above its rate-sensitive characteristics which had been driving the world’s premier reserve currency.

We’ve seen a positive feedback loop develop over the last few days after the weaker than expected US inflation figures gave a huge and historic boost to financial markets.

The S&P 500 on the D1 time frame was in a long down trend that started at the end of August. A last lower bottom formed on 13 October at 3492.4.

A closer look at the Momentum Oscillator reveals a positive divergence between point “a” and “b” when comparing the lower bottoms at 3581.7 and 3492.4. This could have alerted technical traders of a possible momentum reversal.