- The CAD/JPY currency pair has pulled back just a bit after opening higher against the Japanese yen on Monday.
- At this point, the Loonie continues to bounce around between the 50-Day EMA underneath, and the 200-Day EMA above.
- It is probably worth noting that the 200-Day EMA sits near the ¥101 level, an area that is important in general.
The CAD/JPY Pair Is Highly Correlated to Crude Oil
With that being said, the market is likely to continue to see a lot of noisy behavior in this area, which makes quite a bit of sense considering everything that is going on and not only Canada, but the crude oil market itself.
The Bank of Japan continues to fight higher interest rates, meaning that they are buying unlimited bonds. As long as they do that, they will be forced to print unlimited yen, which obviously floods the market with more yen. With that being the case, it does make a certain amount of sense that the Canadian dollar might do fairly well against the yen, but at the same time we have crude oil consolidating, not really going anywhere for a longer-term move. Remember, the Loonie is highly levered to the crude oil market, so you need to pay attention to that as well.
At this juncture, if we can break above the ¥101.50 level, then I think this pair is likely to go higher, perhaps reaching the 103 and level, and then eventually the ¥106 level. The 50-Day EMA underneath would of course be crucial to hold above, so if we start to rally at this point, I will more likely than not be willing to use the 50-Day EMA which of course is a scenario where you have a dynamic stop loss built into the charts.
All of that being said, if we were to break down below the 50-Day EMA, then I think we probably go looking to the ¥98 level, perhaps even the ¥96 level after that. Pay attention to crude oil, because of it starts to take off that will almost certainly push this pair much higher. You can also make an argument for a nice rounding bottom pattern that had formed of the last couple of months, so this will be very interesting to watch as it could be a big move just waiting to happen.
Ready to trade our daily Forex analysis? We’ve made a list of the best forex trading platforms Canada to trade Forex worth using.