CAD/JPY staged a solid comeback on Thursday, reversing a sharp drop witnessed in the previous session after the Canadian dollar plunged to new multi-year lows versus the US currency, mirroring the drop in crude oil prices. The Canadian dollar regained lost ground and trades higher against the Japanese yen as traders favour the CAD on expectations of arebound in Canada’s retail trade.
Retail sales are projected to rise 0.6% during May, after a downward surprise of a 0.1% decline in April. At the same time, the core retail figure, which excludes automobile sales, is projected to rise 0.8% after dropping 0.6% in April.
Hence, we are anticipating CAD/JPY to extend its recovery towards 96 barrier and beyond as improved consumer activity could help lift the struggling Canadian dollar out of the six-year lows hit versus its US peer.
Later in the NA session, initial and continuing jobless claims are also due from the US which may have favourable impact on the USD/JPY pair, which may eventually support the cross in CAD/JPY.
At the same time, US oil prices have somewhat stabilized today after the recent slump on the back of an unexpected risein crude reserves, which also boosted the resource-linked loonie.
Technically, CAD/JPY is likely to extend its recovery path and eyes 96 handle on the release of upbeat Canadian retail sales data.In 4 hour chart, the pair extends in a falling wedge formation and is poised to the retest the pattern resistance located at 95.56. Beyond which doors will open for a test of 96 levels and further 20-DMA located at 96.30. The RSI at 46 aims has turned slightly flat, although heads towards the mid lines while MACD also backs the case for further upside.
While on daily charts, the pair has formed a piercing candle stick pattern indicating bullish reversal. The daily RSI at 36 has inched higher suggesting more room for upside. While the other technical indicators also support a break on the upside. IN case the retail sales figure come out below estimates or in line with estimates, CAD/JPY could fall back to 95 levels, below which the immediate support can be seen around 94.65-94.50 zone.
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