Forex Technical Update
The Japanese Yen has found some ceiling this week after strengthening sharply at the latter part of January. The CAD/JPY fell from near 77.60 to about 74.75. Although the bullish momentum seen in the 4H chart is killed (RSI went below 40 and even kissed 30), the market still holds a bullish bias. It is respecting the rising trendline drawn from Jan.9, and is respecting the 200 4H simple moving average. This is also between 50% and 61.8% retracement of the rally from 74.51 to 77.59. It has basically flattened after the sharp correction back to mean price action.
What are some factors that would help build up the CAD/JPY?
First, the closer USD/JPY gets to the record low of 75.55, the more likely the prospect of Japanese yen intervention. The USD/JPY market has also started to flatten out at 76.00. The speculation of intervention at the moment stalls Japanese yen strength but what about the Loonie? (CAD)?
The Canadian dollar tends to track oil as Canada is one of the major oil exporters, (mostly going toward the US). The chart below of Brent Crude oil. As you can see the market has a bullish momentum (RSI held above 40 and has tagged 70). However it is now stuck in a triangle. So, if the market rallies above 112.60, clearing the triangle to the upside, and extends higher the CAD should track and gain an edge as well against the JPY, which has intervention watch limiting its strength.
Fan Yang CMT is a forex trader, analyst, educator; and main contributor for FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.
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