CAD/JPY hit as stocks and crude prices drop

Today’s session has clearly been dominated by risk aversion with safe-havens gold, silver and yen all shining brightly.

Today’s session has clearly been dominated by risk aversion with safe-havens gold, silver and yen all shining brightly. Meanwhile stocks, oil and commodity currencies all took a hit. Sentiment has been cagey for the past week and a bit because of concerns over the economy, with the latest macro pointers in the US taking a downturn. Investors are also waiting for the start of high-level trade talks between the US and China, scheduled for later this week. With Donald Trump putting several more Chinese technology companies in a blacklist, investors were erring on the side of caution in case the talks collapse again without any agreement.

Among the yen pairs being impacted by today’s risk-off trade is the CAD/JPY. The Canadian dollar failed to find support from stronger-than-expected Canadian housing market data and was instead hurt by today’s rise in risk aversion and falling oil prices, with investors continuing to price in weaker demand growth for crude amid increasing signs of an economic slowdown. The CAD will remain in focus with key Canadian employment report expected on Friday, and as investors continue to watch the US-China trade developments. So, it is quite possible that rates could rise again should we see favourable developments, which means traders should remain nimble.

Today’s publication of Canadian housing market data beat expectations – not that it provided much support to the Loonie. Building Permits rose 6.1% m/m vs. 2.3% expected while Housing Starts came in at 221K vs. 217K eyed.

From a technical point of view, the trend remains bearish for the CAD/JPY given that price is holding below both the downward-sloping trend line and the 200-day moving average. For a moment though it looked like the bulls were back in town after the CAD/JPY broke above yesterday’s high and resistance around 80.75/80. But that was a brief fake out, and rates have been fading throughout the afternoon. At the time of writing it was coming off its worst levels, although remained near the day’s lows. If the CAD/JPY breaks beneath Monday’s low at around 80.05 then it will have created a bearish engulfing candle on its daily time frame. If seen, this would point to further weakness tomorrow, with the next support coming in at 79.80.

However, if the bulls step in here and drive prices back to a fresh high on the session then that would invalidate the bearish bias as we will have gone back above the 80.80 resistance level. In this potential scenario we could see a nice recovery towards the more significant resistance trend line and the 200-day moving average circa 81.25-82.00 in the days ahead, as the sellers rush for exits.

Source: Trading View and City Index.


This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

GAIN Capital Singapore Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the GAIN Capital group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), GAIN Capital Singapore Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact GAIN Capital Singapore Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither GAIN Capital Singapore Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

GAIN Capital Singapore Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit for the complete Risk Disclosure Statement.

Important Notice:

Cryptocurrencies are not legal tender currency and trading of derivatives on Cryptocurrencies are currently not covered under any regulatory regime in Singapore. Consequently, investors should be aware they do not have protection under the Securities and Futures Act (Cap. 289). Please ensure that you are fully aware of the risks.