The Canadian dollar rose a bit against the Japanese yen but then fell as news of the US Treasury issuing double the debt in the 30-year for the next month or so.
CAD/JPY
The Canadian dollar initially pulled back just a touch during the trading session as there was a bit of a backlash against the carry trade for a moment, with the US dollar plunging against the Japanese yen after the Treasury market issued a statement saying they were going to double the issuance of the 30-year for the next month or two. And with that being the case, people started unwinding the carry trade. There was a lot of fear, and while this is the Canadian dollar, it did have a bit of an influence because the Japanese yen surged so much against the US dollar.
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Later in the day, we've seen a bit of a bounce, and we are hanging out right around the 50-day EMA. Essentially, nothing's changed, and questions now are going to be more along the lines of, do the Treasury in the United States and the Federal Reserve, do they know something that the rest of the world doesn't? We do have the FOMC meeting minutes coming out a little bit later. Maybe they really are concerned, but we've recently had statements from the Federal Reserve governor in Cleveland that have suggested that maybe a couple of interest rate hikes might still be on the table. So, there is a lot of uncertainty.
Technical Resistance and Carry Trade Dynamics
The 115-yen level seems to be certain, though, certain to be resistance, and I'll be watching that. If we can clear that, then it's a good sign. The bounce has been pretty healthy, and the interest rate differential is still pretty wide.
So, with the Canadian dollar offering a positive swap, and it being Wednesday, you get that extra swap on Wednesday with most brokers. It'll be interesting to see how this plays out, but I still like the long side. This has nothing to do with Japan, and everything to do with people freaking out about the Treasury Department in the United States.
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