CAD/JPY Gunning for 100

CAD/JPY Gunning for 100

CAD/JPY Gunning for 100

After dropping to a low of 91.75 in late January, CAD/JPY staged a dramatic recovery to trade all the way up to 100. The currency pair tested this level 4 times this month and is now itching for a break. While the rise has been largely driven by the turnaround in oil prices, in the long run, it is the improvement in economic data that will keep the Canadian dollar bid. The previous decline in oil prices hit Canada hard and now that prices are stabilizing, we should start to see positive economic surprises. In fact, the Bank of Canada already turned optimistic and is no longer looking to lower interest rates this year. Next week’s Canadian retail sales and consumer price reports will play a large role in determining whether CAD/JPY breaks this key psychological and technical level.

Taking a look at the charts, the last time CAD/JPY closed above 100 was in January but that was coming off a higher level. Back in October CAD/JPY surged from a low of 92.91 to a high above 106 and on the day it broke 100, CAD/JPY came close to testing 101, consolidated the day that followed and then began a powerful move higher. Given the recent consolidation in the pair, we believe that a similar move could occur especially given the tight consolidation right below these levels. If 100 is broken, the next level of resistance will be at 100.85, the 61.8% Fibonacci retracement of the December and January decline. If it fails to break this key level on a closing basis and drops below 99, it is most likely headed back to 98.

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