Potential Signal:
- I’d be a buyer on a daily close above the 200 Day EMA, with a stop loss near the 105.50 again level, and a target of ¥190.
The Canadian dollar initially fell against the Japanese yen during trading on Thursday but has found buyers since then to turn things around and form a bit of a hammer. We are currently sitting just below the ¥160 level, and by extension, the 200 Day EMA. This is an indicator and an area that’s been very important, so I will be watching this pair closely.
Japanese Yen
The Bank of Japan has a major problem in the Japanese Government Bond market, as there have been a couple of days where there have been absolutely no bidders. This has traders thinking that the Bank of Japan will have to do something about quantitative easing and perhaps start providing liquidity for the bond market, something that’s been a problem more than once. Ultimately, if the market were to break out above the 200 Day EMA, then it’s obvious that the Japanese yen has bigger problems, especially against the lowly Canadian dollar, which has been weak for some time now.
If we do fall from here, the 50 Day EMA comes into the picture near the ¥104.50 level, and is rising. This is a technical indicator that a lot of people will be watching, so therefore I think I would expect to see some type of reaction. Anything below that level then has the market looking toward the ¥102 level, which is the bottom of the overall consolidation that we had been in. Anything below that would be catastrophic. However, I suspect that a breakout to the upside is more likely than not, so that’s what I’m waiting for. If we can break above the 200 Day EMA, we may see a lot of follow through and a lot of momentum coming into the market.
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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.