CAD/JPY Targets New Highs as Yen Weakens #15

Market Overview

The Japanese yen has continued its downward spiral, leading to the yen reaching its lowest level in three months against the Canadian dollar. This sustained weakening comes despite strong warnings from Atsushi Mimura, Japan’s senior currency diplomat, signaling readiness for intervention. Mimura’s statements mark the most direct warning to speculators in recent months, reflecting increasing concerns over speculative pressure on the yen. Meanwhile, the Canadian dollar has remained resilient, benefiting from positive macroeconomic data and stable commodity prices, further accelerating CAD/JPY’s bullish move.

Technical Analysis

On the daily chart, CAD/JPY demonstrated bullish strength as buyers managed to breach the significant resistance level of 110.693 in yesterday’s trading session. This breakout paves the way for a move toward the next immediate resistance at 111.167. Should the momentum continue, the pair is well-positioned to target higher resistances at 111.770 and eventually 112.436. The prevailing bullish sentiment is supported by a consistent series of higher highs and higher lows, indicating the market’s current preference for long positions.

Oscillators Confirmations

The Relative Strength Index (RSI) is comfortably in bullish territory, pointing to solid upward momentum without yet reaching overbought levels, suggesting there is still room for buyers. Meanwhile, the Moving Average Convergence Divergence (MACD) is signaling continued strength, with positive histogram bars and a rising signal line that supports the ongoing bullish bias. The moving averages also show a strong alignment, further underscoring the current upward momentum.

In contrast, the bearish scenario for CAD/JPY would require sellers to bring the price back below the recently breached level of 110.693. If successful, this could lead to a correction towards the support levels at 110.027 and eventually 108.950. Such a move would suggest that market participants are taking profit or reacting to any major changes in the broader macroeconomic landscape.

Key Technical Levels Overview

Resistance Levels:

• Resistance 1: 111.167
• Resistance 2: 111.770
• Resistance 3: 112.436

Current Price: 110.875

Support Levels:

• Support 1: 110.693
• Support 2: 110.027
• Support 3: 108.950

Key Events to Monitor

Market participants should closely monitor the upcoming Japanese Bond Market Report and Household Spending Data set to be released on Friday, as these will provide further insights into Japan’s economic resilience amidst a weakening yen. Additionally, Canadian Labor Market Reports are also scheduled for Friday and could impact the CAD/JPY pair significantly, depending on the tone of the data. Strong employment figures in Canada could further support the Canadian dollar, amplifying the recent gains against the yen.

Conclusion

CAD/JPY continues to trade with a bullish outlook as the yen weakens, with buyers aiming to sustain momentum beyond key resistance levels. The next moves will hinge on upcoming economic data releases from Japan and Canada, which could determine whether the current uptrend will persist or if a reversal may be on the horizon.