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FX Analysis

Charts of the day – a potential rise in JPY and loss in CAD

cad jpy

The Fed March meeting minutes shows the US Reserve Bank may start unwinding its balance sheet at a pace of US$95 billion per month as soon as May, which is very aggressive on the size and the speed for the “Quantitative Tightening” (QT) program. The statement sent jitters to the broader equity markets and the USD drifted higher. While the US long-dated bond yields spiked on the hawkish stance, the shorter-dated bond yields fell. This could cause a potential appreciation of the Japanese Yen as currency markets more reflect the short-term borrowing rates, where USD/JPY may have been overbought since March.

On the other hand, the oil prices slumped on the joint oil release from both US and the IEA countries. The WTI futures fell under $100 overnight, which could further press on the heavily oil-related currency, the Canadian dollar.

Based on the above narratives, a potential top reversal in CAD/JPY and bottom reversal in USD/CAD could be seen in the near-term technical perspectives.

CAD/JPY – four hourly chart (a potential continuation of retreating)

Key technical elements:

  • The price is moving under multi short-term moving averages, including 5-day, 10-day, and 20-day, indicating a continuation of the downside pressure.
  • The RSI and Stochastic all had bearish cross-down from the overbought territory, signaling the selling momentum is still strong
  • MACD has formed a dead cross, suggesting the uptrend may be over

Key price levels:

Supports: 97.00-97.28, 95.70, 94.56

Resistances: 98.90-99.22

USD/CAD-Daily (on course for a double-bottomed reversal)

Key technical elements:

  • The price has formed a potential double-bottom reversal on March 30 and April 5 respectively, with the price breaking up the potential neckline resistance at 1.2541.
  • Stochastic had a bullish cross over from the oversold territory, with a golden cross, suggesting the downtrend has bottomed out.
  • MACD also formed a golden cross, with the upside momentum starting to build, indicating an ongoing bottom reversal trending

Key price levels:

Supports: 1.24-1.2426,1.2541

Resistances: 1,2620, 1.27, 1.28


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