Market News & Analysis


Top Story

Double Whammy for CAD/JPY

The CAD/JPY has taken a big hit this week due to both a weakening Canadian Dollar and a stronger Japanese Yen.  The continued hit to Canadian data, this time in the form of weaker inflation data, and the dovish tone of the BOC this week have caused the Canadian Dollar to move lower.  In addition, the flight to safety amid concerns of the coronavirus spreading around the global has given strength to the Japanese Yen.  As a result, the CAD/JPY is down over 1% on the week so far. 

On a weekly chart, CAD/JPY has been in an upward sloping channel since the week of August 26th.  Last week, the pair tested, and failed, horizontal resistance, the 200 Day Weekly Moving Average, and the 61.8% retracement from the highs on the week of October 1st, 2018 to the January 2nd, 2019 Yen flash crash lows near 84.40/84.80.  In addition, price has gone down and tested the bottom trendline of the upward sloping channel near 83.00.  The trendline is holding so far.

Source:  Tradingview, City Index

On a short-term 60-minute chart, we can see  how much of the weekly move came after yesterday’s dovish BOC rate decision meeting.  As CAD/JPY traded lower to near the weekly channel line, price began to diverge with the RSI, and the pair put in a hammer candlestick formation off the low.  This was a sign the pair may be ready for a bounce.  So far, CAD/JPY bounced slightly but hasn’t been able to take out the horizontal resistance or 38.2% retracement level from the highs before the BOC to today’s hammer how, which is hear 83.50.  The 50% retracement level comes across at 83.70, and horizontal resistance and the 61.8% retracement level is neat 83.85/83.90.  Support comes in at the day’s lows and the weekly rising channel trendline near 84.00/83.05. 

Source:  Tradingview, City Index

Below that,  horizontal support comes in at 82.75 on a 240-minute timeframe, and they the 38.2% retracement level from the August 23rd, 2019 lows to the January 17th highs near 82.25.

Source:  Tradingview, City Index

If there continues to be more verified cases of the coronavirus the Yen may continue to strengthen.  In addition, on Friday Canadian Retail Sales for November will be released.  Expectations for the headline number are 0.4% vs -1.2% last.  If the Canadian data is worse than expected, the Canadian Dollar may continue to weaken.  This could be a dangerous combination for the CAD/JPY. 


Disclaimer

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 cityindex.com.sg 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.