The Canadian Dollar Supported Against the Japanese Yen

Alan Penny

24 September 2019

2 min read

Flags of Canada

  • The Canadian dollar very sensitive to oil
  • Japanese yen a well-known safety currency
  • Commodity versus safety a good proxy for overall risk appetite

The Canadian dollar initially fell during the trading session on Tuesday, but it has turned around to show signs of life again. Ultimately, this is a good sign, especially considering the technical analysis involved. At this point, crude oil markets will have a significant influence on what happens with the Canadian dollar, especially against the Japanese yen. This pair features an economy that is an oil exporter in the form of Canada, and an economy that imports 100% of its petroleum in Japan.

Beyond that, this is essentially a “commodity versus safety currency pair”. Therefore, the attitude of the overall markets will come into play as well. If that’s going to be the case, then it’s obvious that you should be paying attention to the other markets around the world, and whether they are rising or falling, to give you an idea as to how this one may perform.

Technical analysis

The technical analysis for this pair is quite interesting. The 20-day EMA is currently crossing above the 50-day EMA, which is of course a short-term bullish sign. The fact that the 50-day EMA is holding at support is rather bullish, just as the 200-day EMA above the recent high is resistive. At this point, it looks as if the market is trying to decide which direction to go longer-term. The recent bounce was from the 38.2% Fibonacci retracement level. That is an area that a lot of traders pay attention to, so it should be no surprise that we have turned around from that region. Beyond all of that, the ¥81 level is a significant figure that will attract attention.

CAD/JPY chart

Trading this pair going forward

Trading this pair going forward is going to be a bit choppy, but it does look as if the market is trying to rally from here perhaps even to form a bit of a bullish flag or pennant. That being said, there is a lot of noise above, so it may be better suited for short-term traders to continue to buy the dip when they get an opportunity.

To the downside, the ¥80 level is a major support level based on not the only significant figure, but also the 61.8% Fibonacci retracement level underneath. To the upside, the-200 day EMA will be a major barrier. However, if the market can clear that level and then the ¥82.50 level, the longer-term uptrend should assert itself and send this pair much higher.

This is a market that’s going to behave to the overall pattern and profile of global markets in general. With that in mind, headlines will knock this pair around, but it certainly looks as if it is trying to break to the upside so far, and perhaps even show massive amounts of support underneath.

Written By
Alan Penny

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