In case you missed our latest Global Market Weekly Recap, you should know that Japanese officials like BOJ members and its top currency diplomat have hinted that they’re uncomfortable with the yen’s sharp and sustained downswings.
Meanwhile, commodity-related currencies like AUD, NZD, and CAD are finding it hard to get sustained demand as their respective central banks signal their readiness to switch to more dovish monetary policy biases.
Remember that directional biases and volatility conditions in market price are typically driven by fundamentals. If you haven’t yet done your fundie homework on the Canadian dollar and the Japanese yen, then it’s time to check out the economic calendar and stay updated on daily fundamental news!
CAD/JPY 4-hour Forex Chart by TradingView
CAD/JPY recently turned lower from the 111.50 minor psychological level that was a few pips away from the R1 (111.48) Pivot Point line.
What makes the rejection more interesting is that the resulting downswing also took CAD/JPY below a trend line support that had been valid since the start of the year.
CAD/JPY is not trading closer to 110.80 area near the Pivot Point (110.81) line and the broken trend line support.
Are we looking at a break-and-retest setup in the making?
Look out for a couple of bearish candlesticks that may draw in enough buyers to start a longer-term downtrend for CAD/JPY. Another bearish downswing, coupled with a fundamental catalyst, could send CAD/JPY to its 110.20 previous lows if not the 109.00 February lows.
If you believe that CAD/JPY’s uptrend hasn’t ended, however, then you can also wait for the pair to trade back above the “broken” trend line.
An upswing that takes CAD/JPY sustainably above the 111.00 psychological level could restart its uptrend and take the pair to new 2024 highs.
What do you think?