Technical Outlook: CAD/JPY

Fundamental Brief (CAD/JPY)

Focus remained on oil prices following yesterday's report by the IEA which forecasts the crude oil market rebalancing over the coming months, following excessive supply for the last 2 years. Consequently, WTI has continued to strengthen throughout the Asia-Pacific session with price now just below $44 per barrel. I expect the strongest currency to be CAD as the IEA's latest report should see oil prices remain well supported which in turn should support CAD.

The weakest currency is expected to be JPY as further flows out of the safe haven currency are likely as sentiment continues to improve with equities and the commodities complex overall in positive territory.

CAD: The BoC is most likely to leave monetary policy unchanged at their next meeting as Canadian inflation is within the BoC’s target range of 1-3% with the economy also supported by accommodative fiscal measures. If the BoC did conduct a policy change within the next 3 months, it would likely be a rate cut based on concerns over Canada’s competitiveness since CAD’s appreciation throughout the year. Although this gives CAD a slightly bearish fundamental bias, with most central banks currently in easing cycles CAD has a comparatively neutral bias.

JPY: The BoJ is most likely to ease policy further in the near future as the increases made to its ETF purchases and USD lending programmes will likely be insufficient in helping inflation reach its target of 2%. Furthermore Kuroda’s pledge to "conduct a comprehensive assessment" of economic and price developments when the BoJ next meet highlights that further easing is still on the table. With further easing by the BoJ likely we continue to maintain a fundamentally bearish view on JPY, however, due to its status as a safe haven currency, JPY will likely strengthen in times of risk off sentiment.

Technical Outlook

Currency performances:

1-year performance: -18.01%

6 months performance: -4.13%

3 months performance: -6.57%

1-month performance: -2.34%

Trend Analysis: Bullish (50 sma above 200 sma)

Critical Levels: Support at 77.450, resistance at 78.800

Summary: Price has recently broken out from a bearish channel and currently trading in a bullish channel. I am expecting more upside in this pair.



Secular Trend (% Year on Year change)

Summary: Negative (Below 0), diminishing growth



Sentiment (Base on CMC Markets Clients)

Number of buyers: 76%


Number of sellers: 24%

Position value of buyers: 66%

Position value of sellers: 34%

Overall sentiment: Bullish