CAD and Yen set pace in Asia open

May 27, 2016

CAD traders are looking  very nervous as of late as the USDCAD defies fundamental consensus in the market and has acted in a bearish manner. Despite the forecasted fall in CAPEX, which is expected to have an impact on business investment and also GDP in the Canadian economy it would seem that traders are still buoyant on the back of oil markets which have so far remained more upbeat than anyone expected. Certainly for me the upcoming GDP and trade data will be key for the Canadian economy and many are betting that it will be the turning point for the USDCAD and how it rallies, as strong US data has been the name of the game recently.

Chart wise, the USDCAD failed to break through the key resistance level at 1.3149 and we saw the market run out of steam at this point. The following breakthrough of support at 1.3023 has been met with caution though as the market rushed down before turning back at the 50 day moving average, showing that despite the drop for the USDCAD the market is still a little skitterish about large movements lower. For me the upper target continues to be at 1.3402, where the market has a ceiling of resistance in place that the USDCAD should naturally gravitate towards in the coming weeks, however with a weak non-farm payroll we could see it taking a little longer than originally anticipated.

The Japanese economy is set to have no shortage of volatility when it comes to movements today as Japanese CPI data is due out from the Bank of Japan. The general consensus has so far been CPI is expected to fall to -0.4% y/y, but many will be hoping that there is some room for improvement here and that falling energy prices will not have a massive impact. If we do see a worse result then we could be in for some large moves for the USDJPY.

The USDJPY technically speaking continues to find itself moving in a tight range sideways, which is never ideal for trading unless you're playing of key levels. In this case the trend has been somewhat bullish, but has slowed down after a brief push at resistance at 110.737 and finding a ceiling level at 110.210. For now it feels that the market is waiting for the result due out today on CPI data, and with it we could see further pressure on these levels. In the event of a drop lower I would anticipate the 20 day moving average looking to act as dynamic support, but anything lower than that would likely target 107.933. 

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