CADJPY has been trending lower on its 1-hour chart, moving inside a descending channel connecting the highs and lows. Price just got rejected on its test of resistance at the 92.50 minor psychological level and is on its way back to the bottom.
Stochastic is pointing down but looks ready to turn up from the oversold area, hinting that buyers might take control soon. Meanwhile, RSI is still heading south, which means that there’s enough selling pressure left for a test of support at the 91.00 handle.
The 100 SMA is below the 200 SMA, confirming that the path of least resistance is to the downside and that the selloff is likely to carry on. The moving averages are edging closer together though, which means that an upward crossover might still be possible.
CADJPY Fundamental Factors
The Canadian dollar is currently being weighed down by a return in risk aversion, as traders are booking profits off their recent longs after the PBOC rate cut last week. This has temporarily lifted commodity prices and comdolls but investors appear doubtful that the easing moves will be enough to support growth prospects.
The biggest event risk for this setup might be the BOJ statement later on in the week, as some are predicting that the Japanese central bank would announce increased stimulus programs. Data from Japan has been mostly disappointing, especially when it comes to inflation and industrial production.
Japan is set to print more readings on Friday ahead of the central bank announcement, with household spending expected to dip from 2.9% to 1.2% and the Tokyo and national core CPI readings likely to come in negative.
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