CAD/JPY: Bears looking for a quick snack ahead of key GDP data

CAD/JPY is back under pressure on both a fundamental and technical view. In Asia, the pair is steady but came into supply again overnight as the markets expect the Bank of Canada to act, potentially as soon as September with a surprise rate cut, catching up with its counterparts to take measures against prospects of slower global growth. 

However, Canada remains in the opposite camp to such economic powers as the US and China and European countries that have been failing to impress. We have seen a number of positive economic surprises and higher than expected inflation and the Canadian economy has registered the strongest growth among G7 countries in Q2 - We now await this week's release where there are consensus expectations of 3.0%. Many would argue that with the private-sector job creation in 2019 is the strongest since 2011, core inflation is right on the central bank’s target with risks to the housing sector fading, unless the trade conflict between the United States and China escalates further, there is no need for monetary stimulus in Canada.

Net longs falling further

However, CAD net long positions fell further amid rising expectations that the BoC will respond to the trade tensions by lowering interest rates in the coming months. Investors will be looking for fresh clues, if not a cut, from the BoC scheduled to meet on September 4 when a dovish statement could be published.

CAD/JPY levels

CAD/JPY is pressured below the wider fan of the GMMA and the upside momentum had been capped by a daily descending trendline with lower highs. indeed, there is a bearish bias. However, with key data coming up, should the GDP impress significantly, BoC rate cut bets will be pulled from the table and so long as there are no risk-off escalations, consolidation could well be the theme.