CADJPY Technical Analysis

Technical Analysis

CAD

  • The BoC left interest rates at 5.00% as expected at the last meeting but remains
    prepared to raise rates further if needed.
  • BoC Governor Macklem delivered a
    less hawkish speech in the press conference compared to his previous remarks.
  • The recent Canadian CPI missed
    expectations across the board and the underlying inflation measures eased,
    which was a welcome development for the BoC.
  • On the labour market side, the
    latest report beat expectations although the unemployment rate ticked higher
    again.
  • The market expects the BoC to start
    cutting rates in Q2 2024.

JPY

  • The BoJ kept its monetary policy basically
    unchanged at the last meeting but formally widened the YCC to 1% on the 10-year
    JGBs stating that it will be a reference cap.
  • Governor Ueda repeated once again
    that they won’t hesitate to take easing measures if needed and that they are
    not foreseeing sustainable price increases.
  • The Japanese CPIshowed that inflation pressures are easing although
    they remain well above the BoJ’s 2% target.
  • The latest Unemployment Rate
    remained unchanged near cycle lows.
  • The Japanese Manufacturing PMI fell
    further into contraction, but the Services PMI ticked higher remaining in
    expansion.
  • The latest Japanese wage data beat
    expectations and as a reminder the BoJ is focusing on wage growth to decide
    whether to tweak its monetary policy.
  • The market expects the BoJ to hike
    rates in Q2 2024.

CADJPY Technical Analysis –
Daily Timeframe

CADJPY Daily

On the daily chart, we can see that CADJPY continues
to trade in a range between the 107.50 support and the 110.00 resistance. In
such markets, it’s generally best to stay out and wait for a clear breakout
supported by a fundamental catalyst, although traders can also “play the range”
by buying at support and selling at resistance.

CADJPY Technical Analysis –
4 hour Timeframe

CADJPY 4 hour

On the 4 hour chart, we can see that we have some
minor levels on interest where the price reacted to recently. The buyers leant
on the recent swing low to position for rally into the swing high at 108.80. If
the price breaks above the 108.80 level, the rally should extend to the 110.00
handle as the buyers will likely increase the bullish bets. On the other hand,
if the price breaks below the 108.00 handle, we can expect a drop into the key
support at 107.50 with the sellers eyeing a breakout.

CADJPY Technical Analysis –
1 hour Timeframe

CADJPY 1 hour

On the 1 hour chart, we can see that the
latest leg lower diverged with the MACD which is generally a sign of weakening
momentum often followed by pullbacks or reversals. In this case, we indeed got
a bounce on the swing low and the first target for the buyers should be the
108.80 level. That’s where the sellers are likely to step in with a defined
risk above the level to position for a drop into the key support at 107.50.

Upcoming Events

Today we have another US
labour market report with the release of the US ADP data followed by the BoC
rate decision later. Tomorrow, it will be the time for the US Jobless Claims
figures, while on Friday we conclude the week with the NFP report. Weak US data
is likely to weigh on global yields and favour the JPY, while strong figures
might keep the pair supported.

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