CAD/JPY just broke out of consolidation and with the latest monetary policy statement from the Bank of Japan ahead, will the momentum continue?
Before moving on, ICYMI, today’s Daily U.S. Session Watchlist looked at a potential setup on EUR/JPY ahead of the German Ifo report, so be sure to check that out to see if there is still a potential play!
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Fresh Market Headlines & Economic Data:
Upcoming Potential Catalysts on the Economic Calendar
Bank of Japan Interest Rate Decision at 3:00 am GMT (Apr. 27)
U.K. CBI Realized Sales at 6:00 am GMT (Apr. 27)
Italy Consumer & Business Confidence at 8:00 am GMT (Apr. 27)
What to Watch: CAD/JPY
On the hour chart above of CAD/JPY, we can see the bulls made a move on the pair, busting it out of tight consolidation that’s been forming over the last few sessions since the explosive Bank of Canada statement.
So, momentum’s definitely in the bulls favor but with the pair now retesting a strong resistance area just above the 87.00 handle, traders are likely wondering where to next.
That may be determined by the upcoming monetary policy decision from the Bank of Japan, which usually is not a market moving event. And this meeting is not likely to break from the norm as no changes to policy are expected seeing as how they’ll have to balance the economic damage from covid restrictions vs. optimism growing in business sentiment.
In the off chance that the BOJ event does spark volatility in yen pairs, we’ll be looking for a sustained trade above the 87.00 handle for a potential long position.
Even if there is no spark from the BOJ, this behavior makes sense to watch out for a potential long play given the broad risk-on sentiment sparked by the recovery theme and the latest bullish sentiment on the Loonie as the Bank of Canada may look to taper stimulus this year.
Of course, if the BOJ gifts us with a surprise to keep up volatility in CAD/JPY and shifting favor into the bears (i.e., an overly optimist outlook on inflation / growth, the potential to not increase JGB purchases, etc.), then the resistance area could draw in the price action traders to 87.00 and take the pair lower quickly.
And if the market is already lower ahead of the BOJ meeting, we’ll be on the watch for a break of the rising ‘lows’ pattern marked on the one hour chart above.