CAD/JPY volatility is picking up quickly and could stay action pack with several potential catalysts in play this week.
Downside Consolidation Break on CAD/JPY?
CAD/JPY just dropped with the rest of the market on the session as traders turned soured on risk, likely off of weaker-than-expected sentiment data that was just released (e.g., ISM Services PMI at 60.1 in June 2021 vs. 64 in May 2021, ZEW investors’ economic sentiment fell to 63.3 from 79.8).
This is a pretty fresh development, so risk-off sentiment may have legs this week to support the Japanese yen, but we have a heavy economic calendar for the Canadian dollar that could add to the volatility.
On Wednesday, we get the latest Ivey PMI data from Canada, with an expectation to rise from the 647.7 read in May.
And On Friday, we got a top-tier economic update from Canada in the form of the monthly employment report. Expectations there are for the labor market to bounce from last month’s negative net jobs change number.
If both of these reports come in as expected or better in showing positive developments for Canada, then today’s downside break pattern may be very limited or even reverse.
Of course, if the data surprises negatively, then today’s break could be just the beginning of a bigger move to the downside for CAD/JPY, especially if optimism on the global recovery from the pandemic continues to look like it’s seen its best days.
For now, we’ll be in watch mode on CAD/JPY, and if it does make its way back to the 89.50 area, we’ll be watching for a potential short position entry there if Canadian data comes in weak and broad risk sentiment remains negative.
Resistance there should draw in more CAD/JPY sellers, especially if oil prices begin to top out as pandemic recovery optimism fades/OPEC+ decides to raise production output.
What do you all think? Is this the beginning of the turn lower for CAD/JPY? Or is this just a temporary dip in the longer-term uptrend? Let me know in the comments section below!
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