- The Canadian dollar initially pulled back just a bit during the early hours on Friday, only to turn around and show signs of life.
- The market has been banging around this area for a while, and therefore I think you’ve got a situation where the ¥108 level is an area of interest.
- The 50 Day EMA is rallying at this point in time, trying to break above the crucial 200 Day EMA, kicking off a “golden cross” potentially. If we do kick it off, longer-term traders will be very interested in getting long of this market.
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The Canadian dollar has been rallying against the Japanese yen for a while, but the last couple of days have been somewhat quiet. That makes sense, due to the fact that we have rallied pretty significantly, and may have to work off some of the excess froth. The Canadian dollar itself isn’t necessarily what I find interesting in this pair, it has more to do with the Japanese yen itself. After all, when you look around the Forex world, you can see that the Japanese yen has been struggling overall.
The Bank of Japan may have a serious problem on its hands, due to the fact that the Japanese Government Bond market has been struggling to find buyers some days, and therefore we could see a situation where the Bank of Japan has to step in and start buying bonds, kicking off what is known as “quantitative easing.” Because of this, the Japanese yen will get hammered if that ends up being the case, so ultimately, I think we’ve got a situation where the Japanese yen will be shorted against almost everything, so the Canadian dollar will be a winner by default. Pullbacks at this point in time should end up being a buying opportunity from what I can see, with the ¥107 level being a particularly appealing place. To the upside, I think we could go looking to the ¥110 level.
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