Yesterday marked a major turning point (or should I say continuation?) for the Canadian dollar. The Bank of Canada cut the benchmark interest rate to 0.50%, which marked the first rate cut since January when they cut from 1.00% to 0.75%.
But enough talk of interest rates, let’s get down to the technicals. I have been bearish on CADJPY for some time now, more notably since the pair broke below channel support on on June 30th and subsequently rejected the level as new resistance on July 1st.
After falling 350 pips to find support at 94.50, the pair rebounded back to the 97.00 key handle where it once again found selling pressure, causing the pair to stall for several days before finally capitulating on the back of yesterday’s rate cut.
So where to from here?
It’s pretty straightforward, really. The next key support level to keep an eye on comes in at 94.50 – the area that triggered the brief rally earlier this month. After that there really isn’t much standing in the way until the 93.00 area comes into focus.
The first support level in this area comes in the form of a trend line off the January 2013 lows. A break there would see the 2015 low at 91.75 revisited in quick order. Break that and, well, it would paint the pair with a broader bearish outlook for the next several months, possibly years. But let’s not get ahead of ourselves…
Summary: Look for selling opportunities between 96.12 and current levels (95.75). Key support comes in at 94.50, 93.00 and 91.75.