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On January 18 I pointed out two levels of importance on the CADJPY. One was a trend line from the June 2017 low, and the other was the 91.50/60 horizontal level.
I had a hunch at the time that we’d see a break lower rather than higher. The way the pair has started to ‘hug’ that lower level was a sign that bids were beginning to dry up.
Wednesday’s 88.41 close appears to have taken out that lower boundary on a daily closing basis. I suspect sellers will defend the 88.50/60 area as new resistance, which we’re starting to see in today’s session.
If sellers do manage to stay in control, we could see the CADJPY slide lower toward 85.50. A daily close below that would expose the 83.50 handle. Keep in mind that the November 2017 lows at 86.75 could also attract a few bids on the way down.
The idea is in play as long as the CADJPY trades below 88.60 on a daily closing basis (New York 5 pm EST). If it closes back above the area, all bets are off for a move lower.
We could also see a bit of consolidation here given that the mean (per the 10 and 20 EMAs) is about 50 pips above current levels.
As for events to keep an eye on, Canada reports CPI on Friday, January 26 at 8:30 am EST. Then just 30 minutes later at 9 am EST BOJ Governor Kuroda speaks which could move the needle for the Japanese yen.
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