Market participants are actively ignoring negative news. The main news is that the state-owned enterprises in China were ordered to stop purchasing some US agricultural products, including soybeans. This, of course, escalates tension between China and the US. Moreover, clinical trials of Remdesivir, a vaccine against COVID-19, turned out to be disappointing. The fact is that expectations of this vaccine were the main drivers of the market sentiment improvement.

However, there are still signs of optimism. European stock indices opened with a confident rise, oil prices are advancing whereas demand for gold and bonds is dropping. Nevertheless, demand for risk assets is still rather high. Safe-haven assets are under pressure. On Friday, the situation could change due to the publication of the US labor market data.

USD/CAD

On Wednesday, Stephen Poloz will hold his final meeting as the governor of the Bank of Canada. The newly appointed governor is Tiff Macklem. Market participants suppose that the regulator's rhetoric will remain the same. Such expectations have a positive influence on the Canadian dollar.

The wave of optimism is not bypassing the loonie. The net short position on Canadian dollar declined again. The settle price is moving downwards. However, a slump in the spot price compared to the settle price points to the upcoming end of the downward momentum.

Notably, the current surge in positive sentiment is premature. It was mainly triggered by lifting of lockdown measures. However, there are still problems that are pushing the global economy to the recession. It is quite possible that after the stabilization of the epidemiolocal situation, most countries will focus on their economic troubles.

Publication of May employment data is another important event of the week. Analysts suppose that the number of employed people declined by 0.5-1 million. At the same time, the unemployment level advanced to 16% compared to 13% in the previous month. Amid the reports, the USD/CAD pair has all chances to resume the upward movement.

At the moment, the downward trend prevails. The pair may hit the 1.3460 level. However, it will hardly reach the support level of 1.3360. Nevertheless, it is still too early to open buy deals.

USD/JPY

The Japanese yen lost ground amid rising optimism. At the same time, changes in the Japanese economy are so profound that the government decided to take extraordinary measures. In the first quarter of the year, Japan faced a technical slump. Data for the second quarter is expected to be even worse. The demand recovery could be long and unstable.

The situation is really alarming as Japan's government has already developed a special demographic program up to 2025. According to this program, families with one child will receive 10,000 yen a month. For the second child they will get 30,000 yen, 60,000 yen for the third one. The government is planning to take the final decision as soon as possible. The main reasons are general demographic situation, a drop in exports, outflow of tourists, which were boosting demand.

Of course, Japan is also taking other measures to support demand. For example, the government launched the 100,000 yen universal handout scheme. People will receive money during the second quarter. Besides, Japan has provided companies with liquidity, delays in payment of taxes, and social security payments. According to estimates prepared by Mizuho Bank, the current quarter could become the worst in the whole history.

However, the worse the economic situation is, the stronger the yen is. The CFTC report showed that long positions are increasing. Thus, the dollar/yen pair may stop falling and break the current range.

The yen is likely to trade above the upper limit of the rage of 108.08 amid the current optimism. The yen could decline to the lower limit of the range of 105.97 as soon as optimism fades away.