Marshall Gittler
Trading Analysis
CAD/JPY
The dollar traded lower against almost all of its G10 peers during the European morning Tuesday. It was higher against GBP, while it remained stable only vs AUD.
EUR/USD moved higher as the bloc’s PMIs managed to remain above the neutral level. Even though the Eurozone’s preliminary composite PMI - covering both the manufacturing and service sectors - missed the forecast and fell to 52.3 from 52.5 previously, it remained above the neutral 50.0 level for the 15th consecutive month. On top of that, preliminary composite PMI from Germany, Europe’s largest economy, beat market consensus of a moderate decline, pushing EUR/USD slightly up in spite of the lowest preliminary manufacturing PMI reading since June 2013. Investors’ relief that the figure remained above the 50 level was probably the main reason of the rebound in EUR/USD. However, since the overall outlook remains negative in my view, and added to the ECB’s President Mario Draghi recent remarks that the economic recovery in Eurozone is “losing momentum”, I believe that any further rebound is likely to remain limited and I would expect the bears to prevail again soon.
CAD/JPY moved lower yesterday after finding resistance at 99.80 (R2) and today, at midday, the pair is trading near the 50-period moving average. The RSI moved below its 50 line, while the MACD lies below its signal line and is getting closer to its zero line. Taking this momentum signs into account, I would be watchful that the down wave is likely to continue, perhaps for a test near the 97.70 (S1) line and the blue short-term uptrend line drawn from the low of the 8th of August. As long as the rate structure remains higher peaks and higher troughs above that line, I see an uptrend and I would consider any future declines as a pullback before buyers pull the trigger again. Nevertheless, in order to get more confident about the continuation of the uptrend, I would like to see a clear close above the psychological zone of 100.00 (R3). Such a move could set the stage for extensions towards the 101.00 zone, defined by the highs of May 2013.
Support: 97.70 (S1), 97.10 (S2), 96.60 (S3).
Resistance: 99.00 (R1), 99.80 (R2), 100.00 (R3).
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