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Crude oil is still under the spotlight early this week, so I’m looking at this trend play on the correlated Canadian dollar.

Will this CAD/JPY channel hold?

Before moving on, ICYMI, I’ve listed the potential economic catalysts that you need to watch out for this week. Check them out before you place your first trades today!

And now for the headlines that rocked the markets in the last trading sessions:

Fresh Market Headlines & Economic Data:

Crude oil finds buyers as Saudi Arabia hiked prices

IMF: Omicron variant likely to bring in growth downgrades

New Zealand ANZ commodity prices index up from 2.2% to 2.8%

Australia’s MI inflation gauge up 0.3% from previous 0.2% uptick

Australian job advertisements grew 7.4% in November

Bitcoin trades below $50K at early October levels

Oil rebounds above $71 per barrel on Iran talks

German factory orders slumped 6.9% vs. projected 0.2% dip

Italian retail sales post 0.1% uptick vs. expected 0.4% gain

Eurozone Sentix investor confidence index slipped from 18.3 to 13.5

Upcoming Potential Catalysts on the Forex Economic Calendar:

BOE MPC member Broadbent’s speech at 11:30 am GMT

If you’re not familiar with the forex market’s main trading sessions, check out our Forex Market Hours tool.

What to Watch: CAD/JPY

CAD/JPY 1-hour Forex Chart
CAD/JPY 1-hour Forex Chart

There’s not much in the way of top-tier releases in the New York session today, so I’m turning my attention to commodity price trends instead.

So far, crude oil is regaining its footing after Saudi Arabia’s price hike, but the gains might be short-lived since market fundamentals favor more downside.

For one, concerns about the Omicron variant could keep investors on edge and wary of more roadblocks to a global recovery. To make things worse, the U.S. and China recently released oil reserves, so a worldwide glut may be looming.

Also, risk aversion has strongly been in play lately, especially with policymakers rethinking their tightening plans as fresh uncertainties emerged.

With that, CAD/JPY might be able to bounce to the top of its descending channel on the hourly chart and find sellers right there.

This happens to be close to the 88.50 minor psychological resistance, which might keep gains in check. A shallow pullback could hit a ceiling at the 38.2% Fib at the mid-channel area of interest or the 50% level that coincides with the 100 SMA.

The 100 SMA is below the 200 SMA to confirm that resistance levels are more likely to hold than to break.

However, Stochastic is just pulling up from the oversold area to reflect a return in bullish pressure. Better wait for the oscillator to indicate overbought conditions before shorting!