CADJPY has been making lower highs and finding support at the 100.00 major psychological level, creating a descending triangle pattern on its 1-hour chart. Price is currently testing the triangle resistance at 100.25 and may be due to head south again. If so, another test of the triangle support might take place.
Stochastic is pointing up, however, which means that buyers still have enough energy to push for an upside break. If that happens, CADJPY could climb by an additional 100 pips, which is the same height as the triangle pattern. Similarly, a downside break could spur a 100-pip drop to 99.00 or lower.
The short-term 100 SMA is gearing up to cross below the 200 SMA, which would show that the path of least resistance is to the downside. For now though, the short-term SMA is still moving above the longer-term one and suggesting further consolidation.
CADJPY Fundamental Factors
Last week, BOJ Governor Kuroda’s remarks triggered a sharp yen rally when he said that the currency has been able to correct its excessive gains in the past years. Today he pointed out that he didn’t mean to influence exchange rate levels in assessing the real effective exchange rate, prompting the yen to return some of its recent wins.
As for the Loonie, the main event risks might be the release of the CPI and retail sales figures on Friday. Core CPI is expected to show a 0.3% uptick while the headline CPI might show a 0.4% increase. The headline retail sales figure is projected to print a 0.6% rise while the core version of the report could indicate a 0.3% gain.
Weaker than expected data could remind traders that the Canadian economy hasn’t fully recovered from the oil price slump and may be in for another downturn. On the other hand, a strong rebound on both inflation and consumer spending fronts might mean more gains for the Loonie.