CADJPY: Technical Outlook and Perspective of Carry Trade

<p><em>The CADJPY currency pair, which expresses the value of the Canadian Dollar against the Japanese Yen, is one of the most classic risk-related pairs.</em></p>
<p><strong>JPY</strong> is considered a safe haven because of Japan’s relative political stability, the country’s current account surplus and the active domestic investment community in Japan. Canada, at least historically maintained a wide interest rate differential from Japan, made CAD attractive from a <strong>carry-trade perspective</strong>.</p>
<p>The <strong>oil</strong> and <strong>gas industry</strong> is very important for the Canadian economy as an important export energy commodity for the country. Therefore, CAD tends to push higher on the back of oil prices which usually rise when increasing global risk sentiment and growth expectations. <strong>CADJPY</strong> is very sensitive to risk sentiment. The chart below shows the pair’s decline this year.</p>
<p><a href="https://analysis.hotforex.com/wp-content/uploads/2020/07/CJ.jpg"><img class="size-large wp-image-149695 aligncenter" src="https://analysis.hotforex.com/wp-content/uploads/2020/07/CJ-1024×461.jpg" alt="" width="696" height="313" srcset="/wp-content/uploads/2020/07/CJ-1024×461.jpg 1024w, /wp-content/uploads/2020/07/CJ-300×135.jpg 300w, /wp-content/uploads/2020/07/CJ-768×346.jpg 768w, /wp-content/uploads/2020/07/CJ-696×313.jpg 696w, /wp-content/uploads/2020/07/CJ-1068×481.jpg 1068w, /wp-content/uploads/2020/07/CJ-933×420.jpg 933w, /wp-content/uploads/2020/07/CJ.jpg 1366w" sizes="(max-width: 696px) 100vw, 696px" /></a></p>
<p>When global risk sentiment and growth expectations worsen, oil prices tend to fall, and CAD will be dragged down. Meanwhile, JPY tends to strengthen simultaneously as risk capital outflows from Japan are repatriated and investors seek security in safe-haven FX, including <strong>JPY, USD</strong> and <strong>CHF.</strong></p>
<p><a href="https://analysis.hotforex.com/wp-content/uploads/2020/07/CJ-1.jpg"><img class="alignnone size-large wp-image-149705" src="https://analysis.hotforex.com/wp-content/uploads/2020/07/CJ-1-1024×461.jpg" alt="" width="696" height="313" srcset="/wp-content/uploads/2020/07/CJ-1-1024×461.jpg 1024w, /wp-content/uploads/2020/07/CJ-1-300×135.jpg 300w, /wp-content/uploads/2020/07/CJ-1-768×346.jpg 768w, /wp-content/uploads/2020/07/CJ-1-696×313.jpg 696w, /wp-content/uploads/2020/07/CJ-1-1068×481.jpg 1068w, /wp-content/uploads/2020/07/CJ-1-933×420.jpg 933w, /wp-content/uploads/2020/07/CJ-1.jpg 1366w" sizes="(max-width: 696px) 100vw, 696px" /></a></p>
<p>The intraday chart reveals a ranging market the last 4 weeks while today enters the 5th week. Ranging between a low of <strong>78.00</strong>–<strong>79.68,</strong> the price has formed 3 times the same high price and 2 times the low price, so it can be concluded that the starting / sideway has formed a rectangle pattern. Nearest Resistance is at <strong>79.00 and</strong> <strong>79.68 next. </strong>A breakout of <strong>79.68</strong> could retest the <strong>80.55</strong> and <strong>81.93.</strong> Nearest Support can be seen at <strong>78.38</strong> and <strong>78.00,</strong> while breakout level at 78.00 will validate the decline to <strong>76.50</strong> and <strong>73.80.</strong></p>
<p><strong>Click </strong><a href="https://www.hotforex.com/en/trading-tools/economic-calendar.html"><strong>here</strong></a><strong> to access the Economic Calendar</strong></p>
<p><strong>Ady Phangestu</strong></p>
<p><strong>Market Analyst – HF Educational Office – Indonesia</strong></p>
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