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MENAFN- Daily Forex)
During the trading session on Monday, we've seen the Canadian dollar rally against the Japanese yen, but it is giving back quite a bit of those gains. In fact, it has given back about half of them as the 106 yen level seems to be a bit of a barrier. If you look at the history of this pair, the area between 105 yen and 106 yen has been a zone of support, and therefore, it's not a huge surprise that on the way back up, it becomes a little bit of resistance.
If we can break above the highs of the trading session on Monday, then I think we've got a real shot at going to the 108 yen level, which is where the 50-day EMA currently resides.
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That being said, the Bank of Canada has cut rates, and the Bank of Japan is trying to raise them, so it should favor the Japanese yen given enough time. Oil markets have their part to play in this pair as Japan imports 100% of its oil, so it is a little bit more sensitive to oil than many other pairs, as Canada is a major producer of that commodity.
If we break down below the 105 yen level, then it opens up a move down to the 103 yen level. Quite frankly, if I were to buy the Japanese yen, it would probably be against the Canadian dollar or maybe the Swiss franc. Both of these currencies look pretty soft to me. As far as the yen is concerned, we will have to wait and see, but the Bank of Japan is talking about fighting inflation and that's not something we're used to seeing over the last 25 years or so. And that has people a bit confused. There's an entire generation out there that has just never seen this. We are at the bottom of a range, though, so I do expect this to be a fight. I would watch the dollar against the Canadian dollar if it really took off and breaks back above the 1.45 level. You might see the Canadian dollar fall apart against the Japanese yen in concert.
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