The Loonie is seeing short-term action today after the Bank of Canada cuts interest rates, making this simple setup on CAD/JPY one to watch for the session.
Before moving on, ICYMI, today’s Daily London Session Watchlist looked at an opportunity forming on EUR/AUD ahead of the latest euro zone PMI reports, so be sure to check that out to see if there is still a potential play!
|Equity Markets||Bond Yields||Commodities & Crypto|
|DAX: 12111.90 +1.06%
FTSE: 6814.11 +1.43%
S&P 500: 3056.18 +1.76%
DJIA: 26456.77 +2.08%
|US 10-yr 0.973% -0.044
Bund 10-YR -0.628% +0.013
UK 10-YR: 0.369% -0.021
JPN 10-YR: -0.145% -0.03
|Oil: 48.01 +1.76%
Gold: 1638.20 -0.37%
Bitcoin: 8731.21 -0.15%
Etherium: 223.01 -0.06%
Fresh Market Headlines & Economic Data:
- Bank of Canada cuts rates 50 basis points, Stands ready for more
- Fastest contraction in U.S. business activity since October 2013
- ADP National Employment Report: Private Sector Employment Increased by 183,000 Jobs in February
- IHS Markit Eurozone Composite PMI – growth reaches six-month high in February
- German business activity growth slips to three-month low in February amid slump in foreign demand
- Volume of retail trade up by 0.6% in euro area; Up by 0.5% in EU27
- Germany’s Scholz ready for ‘timely, targeted’ stimulus to counter coronavirus: sources
- U.K. Service sector growth slows in February
- Oil rises $1 as OPEC, allies work on big output cut
Upcoming Potential Catalysts on the Forex Calendar for U.S. & Asia:
- Bundesbank Weidmann speech at 6:30 pm GMT
- Fed Beige Book at 7:00 pm GMT
- U.S. Vehicle sales at 9:00 pm GMT
- Fed Bullard speech at 11:30 pm GMT
- Japan Foreign investment at 11:50 pm GMT
- Australia Trade balance at 12:30 am GMT (Mar. 5)
What to Watch: CAD/JPY
As mentioned above in the Market headlines above, the Bank of Canada cut its policy rate by 0.50% to combat the economic threat from the Coronavirus, and said it’s ready to do more if necessary. The Loonie quickly sold off on the statement and is likely to feel pressure for the rest of the session given the likelihood traders will speculate on further rate cuts ahead.
Given this catalyst, odds are in favor of Loonie bears at the moment, making the simple pattern on the one hour chart of CAD/JPY one to watch. We can see that the market has been drifting lower since the end of February from the 85.00 handle, but in the new month, it seems that the bulls have held their ground at the major psychological level of 80.00.
This has created a descending triangle pattern on the one hour chart above, and if you’re a bear on the pair, the move to watch out for is a break below the 80.00 handle, especially if global risk sentiment turns negative once again (likely on any negative Coronavirus updates).
If you’re a bull on the pair, it’s a tough one to argue for the rest of the session, but if we get positive Coronavirus updates, that may bring in more Japanese yen sellers, and more risk-on traders to go along with the positive vibes in the U.S. markets from Joe Biden’s Super Tuesday win.
In this scenario, watch out for a break above the falling highs pattern, but keep your targets small as the BOC rate cut may limit any upside in the very short term.