Ooh, it looks like commodity currencies have been faring well lately! But are these forex gains too good to last? Will CAD/JPY be able to break out of its range?
As you can see from the chart below, CAD/JPY has been bouncing between the range support just above the 89.00 handle and resistance at the 92.00 major psychological level. The pair is currently testing the top of the range, still deciding whether to make a bounce or a break, but stochastic seems to be hinting that a selloff is in order.
I haven’t set any entry orders yet since I’m still waiting for candlestick confirmation and a bit of downside momentum before shorting. Of course I’m also open to entering a long position if Loonie bulls or yen bears take control of forex price action, depending on this week’s catalysts.
As Forex Gump mentioned in his preview of the central bank events lined up this week, the BOJ is likely to sound less upbeat in their upcoming monetary policy statement since the latest reports from Japan have failed to impress. This suggests that the path of least resistance for CAD/JPY is to the upside, especially if Friday’s Canadian jobs release comes in better than expected. Analysts are expecting to see a 10.5K increase in hiring, which might bring the unemployment rate down from 7.0% to 6.9% in September.
I’ll also keep close tabs on risk sentiment and its impact on oil prices, as the commodity seems to have gotten a boost from reports suggesting that the Fed might delay its rate hike. Higher-yielding currencies also drew support from expectations of a prolonged period of cheap credit, which might still be beneficial for consumers, businesses, and trade activity throughout the global economy.
Which way do you think CAD/JPY will go?
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