The Canadian dollar continues to see a lot of noise, as the oil markets are a major focus for almost everyone. Marry that up to the Japanese yen, representing an economy that imports all of its oil, and you have a potential opportunity.
CAD/JPY
The Canadian dollar has bounced a bit against the Japanese yen on Monday, as the ¥110.50 level continues to be an area of interest. Furthermore, we also have to keep in mind that economic numbers out of Canada were somewhat mixed, but this is also a market that is highly influenced by oil, as Canadians are major exporters of oil while the Japanese have to import all of theirs.
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This is an area that has been important in the past, but I don't necessarily think it is the most important support level on the chart. The stochastic oscillator is in oversold condition and starting to cross, so maybe that opens up the possibility of a recovery.
The Japanese yen will be heavily influenced this week by the Bank of Japan interest rate decision on Thursday
The decision is expected to be an additional 25 basis points, but it will also be the statement and the press conference that really get traders moving. Ultimately, this is a positive carry trade, and it is a way to play the oil market, so both of those should be in the positive column when it comes to buying. This is a pair that could be fairly noisy, but these two factors could take over in the right circumstances.
On the other hand, the Japanese are expected to raise rates, but the question will be whether or not they will continue to do so. If they seem hesitant to do so, that could provide cover for the Canadian dollar and other currencies to turn things around and rally against the Japanese yen.
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