The Canadian Dollar has rallied against the Japanese yen on Wednesday, as we continue to see a lot of noisy trading overall. The Japanese yen and oil are probably the biggest factors in this pair at the moment.
CAD/JPY
The Canadian Dollar has shown itself to be rather strong against the Japanese Yen, and when you look at the bounce, it does for the most part coincide with the price of oil bouncing as well. Over the last couple of weeks, we've seen oil jump; that's been kicked into higher gear by the Americans deciding to attack the Iranians again and, of course, the Strait of Hormuz being closed. With that being the case, this continues to be a reasonably decent proxy for oil, and I will continue to look at it through that prism. This could continue to be the case, if the war doesn’t stop soon.
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With this being the case, the market going towards the 117.50 yen level, I think, is probably the story here. That doesn't mean that we get there overnight, but the interest rate differential pays you to be patient, and I think the 117.50 level will continue to be an area of significant resistance based on what we had seen previously. Anything above there, I think takes off, and I think at that point you could be talking 120 yen.
Oil Proxy Dynamics and Bullish Technical Setup
The Japanese yen is actually the story here. It's very weak against most currencies, but when you add oil into the picture, that certainly helps the Canadian dollar. Furthermore, we have seen some better economic numbers coming out of Canada recently; although 1 good month does not make a trend, it certainly has people interested.
This bullish flag pattern here does measure for basically 117.50 yen, so I think it all ties together quite nicely for a buy-on-the-dip type of market.
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