- The Canadian dollar surged on Friday after far stronger-than-expected employment data, lifting CAD/JPY as yen weakness persists.
- Key support sits near 111 and 110.50, with momentum favoring upside targets toward 113 and potentially 114 amid continued yen vulnerability.
The Canadian dollar rallied rather significantly during the trading session on Friday as the employment numbers in Ottawa came out stronger than anticipated. The Canadians were expected to lose 1000 jobs last month, but they actually added somewhere in the neighborhood of 55,000 jobs. This, of course, has pushed the Canadian dollar higher, and the fact that it's matched up against the Japanese yen makes it strong here because the Japanese yen, of course, is a currency that is in disfavor due to a lack of interest rate backing it.
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The interest rates in the bond market in Japan have risen over the last several weeks, but we are still not to a point where we are falling apart in the carry trade. Short-term pullbacks open up the possibility of finding value. And I think the 111 yen level is an area that is supported. Underneath, there you have the 110.50 yen level also offering support.
Upside Momentum and Carry Dynamics
The size of the candlestick from the Friday session is pretty impressive. And I do think that we break to the upside, perhaps to the 113 yen level, maybe even the 114 yen level. I do not like to short this market despite the fact that I'm not a big fan of the Canadian dollar itself from a longer-term perspective.
The reality is that the Japanese yen is so toxic that I just don't want anything to do with it at this point in time. And I think we probably continue to see a lot of upward pressure before it's all said and done.
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