CADJPY recently made a strong break below support at the 94.00 major psychological level and may be due for a pullback to the area of interest. This coincides with the 50% Fibonacci retracement level, which might keep gains in check and allow the pair to move back to the previous lows near the 87.50 minor psychological mark.
RSI is on the move up, suggesting that the correction is still taking place. Stochastic is also climbing, which shows that price might move up as well. A larger retracement could last until the 61.8% Fib or until the moving averages at the 97.50 minor psychological handle.
CADJPY Fundamental Factors
Oil prices have rebounded recently, allowing the Canadian dollar to erase its previous losses. Reports showed that OPEC is getting ready to discuss a potential reduction in production or setting a fair value for prices of oil, which is helping ease fears of a supply glut.
In addition, data from Canada namely the CPI and retail sales came in mostly in line with expectations. The monthly GDP report is due today and it could show a 0.2% expansion for June. Stronger than expected data could mean more gains for the Loonie while weak data could allow the selloff to resume.
As for the yen, data has been somewhat weaker than expected. Yesterday’s preliminary industrial production release indicated a 0.6% decline instead of the projected 0.1% uptick. Earlier today, the capital spending report showed a 5.6% increase for Q2, which is much weaker compared to the estimated 9.0% gain.
Nonetheless, risk sentiment continues to favor the Japanese yen recently, as Asian equities have been showing declines again. Other reports lined up include the Canadian trade balance and the jobs report due on Thursday and Friday respectively. The trade deficit is expected to widen from 0.5 billion CAD to 1.4 billion CAD while hiring could pick up by 2.0K.
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