CADJPY could be in for a few gains, as downtrend reversal pattern formed on its short-term time frame. The pair failed in its last two attempts to break below the 94.75 level and just broke above the neckline of the double bottom at the 95.15 area.
This could mean that the pair might climb by an additional 50 pips near the top of the longer-term range at the 96.00 mark. However, the 100 SMA just crossed below the longer-term 200 SMA, indicating that the path of least resistance is to the downside.
Stochastic is also moving down from the overbought zone, confirming that sellers are starting to take control and might be ready to push CADJPY back to the lows around 94.75 or to the bottom of the longer-term range at 94.50. RSI is also turning down from the overbought region, which means that buyers are exhausted.
CADJPY Fundamental Factors
Event risks for this setup today include the release of US crude oil inventories data which should show whether stockpiles are building up or not. Oversupply could put downward pressure on oil prices and the correlated Canadian dollar, as OPEC refrained from reducing its production while US shale companies continue operations.
Earlier today, Japan reported a weaker than expected trade balance and showed a wide deficit of 0.37T JPY versus the projected 0.18T JPY shortfall. This could spur further losses for the yen in the near-term, although risk aversion might still favor the lower-yielding yen later on.
The FOMC minutes are up for release in the latter half of the US trading session and this might also have a strong impact on market risk sentiment. Risk on moves could mean more gains for the higher-yielding Loonie while risk-off sentiment could spur losses. Also lined up from the US today are the CPI readings, which might also give traders clues on whether the Fed can hike rates in September or not.
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