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Bullish CADJPY - Solid Technical Support

Bullish CADJPY - Solid Technical Support

Nick Cawley, Strategist

We look to set-up a short- to medium-term Long CADJPY trade.

  • Canadian rate hike expectations continue to boost the Loonie.
  • JPY boost from trade fears but USD still the haven proxy.
  • Technical set-up looks positive.

Check out the DailyFX Trading Guides for our latest forecasts and educational guides and content.

We will look to go long CADJPY at 85.70 with a stop-loss at 84.60 with targets at 87.10 and 89.40

The Bank of Canada is expected to raise interest rates at its October monetary policy meeting by another 0.25% to 1.75%, the third hike of 2018. Canadian rates stood at 0.50% in May 2017. Despite ongoing NAFTA talks, the Canadian economy remains hot with inflation running at 3%, at the upper band of the central bank’s 1%-3% mandate. Governor Stephen Poloz has reiterated recently that the central bank is in a cycle of policy normalization and that they must not fall behind the inflation curve, hinting that rates may continue to go higher in pre-emptive moves.

The CADJPY four-hour chart shows the pair trading above all three moving averages and edging back to the low of the September 13 bull candle at 85.700, where support short-term support should appear.

CADJPY Four-Hour Chart (July 27 – September 17, 2018)

Bullish CADJPY - Solid Technical Support

The daily CADJPY chart also shows the pair above all three moving averages, while the 20- and 50-day moving average broke above the 200-day ma on August 27, a bullish market set-up. The uptrend off the March 19 low at 80.55 remains in place. A break back above 86.590 will open 87.100 up reasonably quickly and then leave the February 2 high at 89.443 as the next target.

Fibonacci retracement levels offer support at 84.763 (38.2%) – along with the three moving averages - and first-level resistance at 86.065 (50%).

CADJPY Daily Price Chart (November 2017 – September 17, 2018)

Bullish CADJPY - Solid Technical Support

Entry Point: 85.700 (Pending)

Target 1: 87.100

Target 2: 89.400

Stop-Loss: 84.600

--- Written by Nick Cawley, Analyst

To contact Nick, email him at nicholas.cawley@ig.com

Follow Nick on Twitter @nickcawley1

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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