- During the trading session on Monday, we have seen a significant move higher by the Canadian dollar against the Japanese yen, which should not be a huge surprise considering that the last couple of candlesticks were both hammers, so that does lead to the idea that there are plenty of buyers underneath.
- Short-term pullbacks should end up being buying opportunities, as the Canadian dollar is starting to show a little bit of strength overall. The Japanese yen by extension has to pay close attention to the fact that the Bank of Japan cannot tighten monetary policy anytime soon, as the bond market in Japan is freezing up.
- This will work against the Japanese yen given enough time. In fact, there were at least 2 days that I know of last week where there were no bids for Japanese Government Bonds.
Technical Analysis
If we can break higher from here, we would clear the 50 Day EMA, opening up the possibility of a recovery in the Canadian dollar against the Japanese yen, perhaps reaching the ¥105 level initially, and then eventually the 160 and level, which was significant resistance previously. It’s also worth noting that near the 160 and level, we have the 200 Day EMA, which is a major factor in determining the overall trend, so I do think that there would be a little bit of a pushback in that region. Clearing that obviously would be very bullish from a longer-term standpoint, and traders will be paying close attention to it.
On the other hand, if we were to break below the ¥103 level, then it opens up the possibility of a move down to the ¥102 level. The ¥102 level has been a massive support level multiple times, so I do think that is your “floor in the market” at the moment. Anything below there would be catastrophic for the Canadian dollar, but I think at this point in time it’s difficult to imagine the Japanese yen strengthen the like that.
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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.
