CADJPY may have been rejected by a wall of resistance just below 95.0, after an impressive push higher in the last few weeks. Earlier this year the Canadian dollar was weighed down by the possibility of looser monetary policy in Canada, or at the very least a prolonged period of low interest rates. This had helped CAD win the title of being the biggest loser amongst the majors this year (it’s currently down around 3.25% YTD against the USD).
Canada’s positive data surprises
However, towards the end of last month the loonie started to gain some traction due to some strong economic data. Consumer prices rose 0.8% in February, beating an expected 0.6% increase, and GDP rose more than expected in January at 0.5% m/m. This helped CADJPY rocket higher and resulted in USDCAD breaking out of its medium-term upward channel.
The positive data surprises have continued this month, with March’s employment report (released at the end of last week) surprising on the upside. The unemployment rate fell to 6.9% from 7.0% (expected and prior 7.0%) and 42.9K jobs were added over the month (expected 25K, prior -0.7K). This string of positive economic figures may be enough to keep the BoC from turning overly dovish in the near-term (the bank’s next meeting is on April 16), thus it could protect CAD’s downside.
Technical look: CADJPY
Despite Friday’s strong Canadian employment report, CADJPY was unable to break through a wall of resistance (see chart) just below 95.00 (100-day and 200-day SMAs and a long-term trend line), but this was largely due to JPY strength, as opposed to CAD weakness. The yen shot higher on the back of Friday’s NFP figures out of the US. Overall, there appears to be some technical weakness in the pair in the short-term, but if it can break through the aforementioned resistance zone, it may make a run for 95.90.
Source: FOREX.com
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