This analysis features the USD/JPY and CAD/USD. It covers the performance and outlook of the major forex pairs. 

• USD/JPY drops by 1.9%

• BoJ household survey 

• USD/CAD declines as BoC hikes rate to 5%

USD/JPY

Looking closely, Yen's price action in the last 24 hours’ time frame shows the currency's momentum overlapped with the decline of the long-term US bond yields. The US bond yield declined to almost -1.8%, which happens to be the worst performance since June 20th.  This decline is coming after the Feds spoke, noting that In the coming days, there might be higher interest rates.

USD/JPY Technical Levels To Watch

Japanese Yen exceeded the performance of its other counterparts. This performance was more significant against the USD.

In the last two days, USD/JPY dropped about 1.9%. This is notably the worst performance by this pair since May.

Over the past two days, USD/JPY has dropped greatly, producing a bearish trend after a prolonged bullish trend since the start of this year. 

The USD/JPY weekly chart shows the speed of the current decline. The chart shows the price hitting the previous month's support level, however, the lower support is still holding, but at the pace, the price is falling, so traders should watch out for that support level.  

Meanwhile, the daily charts show JPY as a safe haven, especially now that the market sector is affected by the sentiments concerning the confirmed policy stance of the Bank of Japan. 

A lower print may prolong the bearish trend of USD/JPY. However, traders are anticipating the US inflation report slated for today the 13th of July. June's report indicated a slowing inflation, moving from 4.0% y/y in May to 3.1 y/y. This is due to the monetary policies put in place on food and energy prices. 

The Federal Reserve will not benefit from this news, rather it will future strengthen the JPY against the Dollars. Investors are looking out for a less aggressive rate hike, and with JPY being sensitive to Treasury yields, the currency will benefit as its fundamentals are linked to external factors. 

Today's US CPI report is significant and traders are trading sideways as await the report.  This report is significant in impacting the Fed's near-term policy outlook. This will offer a strong momentum to the USD/JPY pair.

On the other hand, the recent quick increase of Japan's benchmark 10-year government bond to a 10-week high will act as a catalyst to keep the currency steady.

Household Survey By BOJ

The Bank of Japan surveyed households to predict household inflation statistics. The survey showed that inflation is predicted to increase by a 10.5% average in the nextrn12 months. 

Adding this latest data with the gradual increase in wages seen in the last 20 years, the Japanese economy seems to be on the rise. However, with the current inflation levels, BoJ is under pressure to go back to the drawing board of ultra-accommodative monetary policy.  The monetary policy was put in place to help caution the effect of inflation. 

USD/CAD

Wednesday's move makes it the second time the institution is increasing interest rates. This is a straight back-to-back rate hike in a quarter point. The president of BoC Tiff Mcklen stated that current data indicates that demand is higher than supply. This means the economy is still heading towards inflation.

In regards to the inflation prediction, the BoC admitted that the price increase has reduced, however, this improvement is not coming from the underlying pressures, but rather from the reduction of energy prices. With this implication, the bank cautioned that the CPI will be obtuse, which means, there is still room for further rate hikes. 

In regards to the rate hike cycle, the direction still looks aggressive. Policy Makers did not explicitly state that rate hikes will remain aggressive, however, they mentioned the implication of high demand which can lead to core inflation. This only means more policy measures will be taken to combat the effect.

The Bank of Canada has increased its rate overnight by a 25-basis point to 5.00%, however, they noted that the advancement of inflation in the future will be imperceptive. In order words, there is still room for rate tightening. This led to the decline of USD/CAD following the report. 

After the report was released, USD/CAD quickly took a hit, which prolonged its daily decline.

There is still hope for a pullback, but this depends on the BoC increasing borrowing costs in the future, or the position taken by the Federal Reserve.