- During the trading session on Monday, we have seen the Canadian dollar rally quite significantly against the Japanese yen, as the Japanese yen was sold off against most currencies.
- That being said, the market looks like it’s turning around at the 50 Day EMA, backed up by the potentially crucial ¥160 level.
- This is a market that’s been in a downtrend for some time, so to have a little bit of pushback is not a huge surprise at this point.
That being said, if we could break above the ¥160 level, then all of a sudden, the Canadian dollar looks interesting against the Japanese yen. This is a particularly interesting pair for me, because I recognize that the Japanese yen is softening up a bit, but Canada has to worry about a potential trade war with the United States, which of course would be horrible for its economy. That environment, the Canadian dollar probably loses value against almost everything.
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However, it’s also possible that the trade dispute between the United States and Canada gets a finalized ending, with some type of an agreement. In fact, I think that’s probably the more likely outcomes than anything else. Granted, it will probably be very noisy along the way, but at the end of the day, there will be a deal. If that’s the case, and the Japanese yen is struggling overall, this could be a significant bullish run just waiting to happen. Unfortunately, it’s very difficult to know when that will be, so this will be a news driven event more than anything else.
If We Do Continue Lower
If we do in fact continue lower in this CAD/JPY pair, especially if the Japanese yen starts to strengthen across the Forex world, then I anticipate that the Canadian dollar is ready to reach the ¥102 level underneath, where it had tested for support just a few weeks ago. A breach of that opens up the possibility of the Canadian dollar then trading at the ¥100 level. This would be a very “risk off event” in this currency pair, and probably something that would be heavily influenced by external factors as well.
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