CAD/JPY short-term support at 82.00 handle post dovish BoJ

The CAD/JPY is trading at around 82.15 after finding support at the 82.00 handle. Tuesday saw the pair losing more than 140 pips amid dovish Bank of Canada comments and soft oil prices. 

Earlier in Asia, the Bank of Japan released its minutes from their Monetary Policy Meeting. The central bank agrees that the momentum towards inflation target is on pace. Most importantly, the majority of BoJ members agree the central bank should continue to pursue powerful monetary easing. 

In a speech on Tuesday Poloz spoke of the need to ‘remain cautious in considering future policy adjustments’ with interest rates expected to ‘move higher over time’. However, according to FX strategists at Scotiabank, the wave of selling that hit the CAD in the last 24 hours was likely an overreaction as Poloz suggested that the economy was still operating in line with the January MPR forecast. 

Compounding the strength of the CAD/JPY recent sell-off is the Yen strength as Japan is facing a political scandal with Abe and his wife allegedly purchasing state-owned land at very low prices and making use of forged documents in the process.

Coming next for the CAD is the ADP employment change in February. Previous readings were at 10.7k.

CAD/JPY 4-hour chart

On the technical side, the CAD/JPY short-term support is seen at the 82.00 handle, followed by 81.50 cyclical low. A breach of the 82.50 resistance would likely lead the bulls to retest the 83.50 resistance. The CAD/JPY is still vulnerable to the downside and the 81.50 will be a significant support to reckon with.