CADPY Target Exceeded
The breakout above 88.21, as per a recent Market Spotlight, has seen price exceeding the initial 89.24 target. The move has seen the pair testing above the bull channel top, where some selling pressure has kicked in. The MACD has crossed bearish and with the RSI indicator showing bearish divergence, there is room for a correction lower here and a retest of the 88.21 level. However, I will be monitoring this area for bullish reversal signals to re-set longs .
Fundamentally, CAD is weakening a little here as a function of the current softening in risk appetite. Put simply, rising inflation expectations have hit risk assets and high-beta currencies like CAD have taken a knock. Looking beyond this short-term noise however, the focus on global vaccination and re-opening favours CAD over JPY. The BOC has upgraded its view and is now looking to move on rates as early as next year while the BOJ is still signalling its intention to maintain (even extend) easing. Longer term players will be looking for higher prices in CADPY over the coming months and any correction here will be a chance to reload.
Key Data to Watch
Canadian retail sales on Friday will be an interesting release. With the Canadian economy undergoing reopening while Japan battles its third wave outbreak, a strong reading here is likely to keep the pair supported in the near term. Beyond this, keep an eye on general risk flows for a sense of how the pair will trade.
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Disclaimer: The material provided is for information purposes only and should not be considered as investment advice. The views, information, or opinions expressed in the text belong solely to the author, and not to the author’s employer, organization, committee or other group or individual or company.
Past performance is not indicative of future results.
High Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75% and 75% of retail investor accounts lose money when trading CFDs with Tickmill UK Ltd and Tickmill Europe Ltd respectively. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.