CAD/JPY makes it to the top of the watchlist thanks to central bank catalysts from both Canada and Japan, and solid support & resistance levels to watch ahead.
Intermarket Snapshot
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Fresh Market Headlines & Economic data:
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- Bank of Canada maintains overnight rate target at 1 ¾ per cent
- Saudi’s Falih sees no need for swift output action after Iran oil waivers end
- Lighthizer, Mnuchin to hold trade talks next week in Beijing: White House
- UK Public Sector Borrowing At 17-Year Low Of GBP24.7 Billion
- Brexit delay has not helped German business climate: Ifo economist
- Japan all industries activity index is down -0.2 to 106.00 in February
- Australia’s flat CPI raises prospect of rate cuts
Upcoming Potential Catalysts on the Forex Calendar:
- Bank of Canada Poloz & Wilkins speak in Ottawa at 4:15 pm GMT
- Bank of Japan monetary policy statement (tentative Apr. 25)
- U.S. unemployment claims at 1:30 pm GMT (Apr. 25)
- U.S. durable goods orders at 1:30 pm GMT (Apr. 25)
What to Watch: CAD/JPY
The Bank of Canada just released their latest monetary policy statement, and its tone was pretty mixed as they were dovish on recent economic conditions but optimistic on the outlook for the rest of 2019. But overall, they are staying cautious for now by maintaining an accommodative interest rate, and will likely not change until the data says otherwise. This sent the Loonie lower against all of the major currencies, and will likely to do so for the rest of the session, but we do have the BoC press conference coming soon, which has the ability to shake up sentiment. You can watch it live here at 4:15 pm GMT.
On the other side of the pair, we’ve got the Bank of Japan’s monetary policy statement in the upcoming Thursday Asia session, and while no changes to its monetary policy are expected, any kind of surprise could spark short term volatility for yen pairs. So, with two central bank event catalysts, CAD/JPY’s volatility should remain elevated in the short-term, and on the one hour chart above, we can several different types of plays depending on the directional biases.
For the bears, shorting from current levels up to the minor support area around 83.25 still makes sense as the odds are low the BOC will give us hawkish rhetoric during their press conference. And with the next potential support area around 81.75 – 82.00, the potential return-on-risk still seeems acceptable if using a tight stop above the 83.25 handle.
For the bulls, with the likely hood of CAD moving lower on the session, waiting for a retest of the support area between 82.00 – 82.50 and signs of reversal candles seems like logical play, especially since we may see bearish behavior from the yen around the BOJ event. Keeping a stop close to the 81.75 swing low and targeting the broken support area around 83.00 provides a good potential return-on-risk, and should be strongly considered if the BOJ does give dovish rhetoric during their statement.