It has been a solid rebound in CAD/JPY this week
The early week momentum was quelled in trading yesterday but the pair sits in a good spot ahead of Jackson Hole as overall risk sentiment remains steadier.
The recovery on Friday was stunning and was an important one technically, preventing a daily close below key support at 85.42. Since then, buyers have done well to push the pair to a high of 87.50 this week before pausing for breath.
The drop yesterday didn’t amount to much as buyers held on to key near-term levels, defending a push towards the 200-hour moving average, seen at 86.57 currently.
Keep above that and there is still some buffer for buyers to try and pick up from where they left off earlier in the week, with resistance seen up ahead at 87.50 and then at the region around 88.30-46 before getting to the 100-day moving average (red line) at 88.56.
Powell’s speech at Jackson Hole is the key risk event for markets this week and in the context of CAD/JPY, it will provide clues on how to proceed for risk sentiment as well as the bond market – which dictates sentiment in the Japanese yen.
The momentum at the start of the week favours the bias that Powell will not spoil the party at Jackson Hole this week, so let’s see if he validates that narrative.