Can CADJPY keep growing?

03 march 2022 126
Volkov_Anton
Volkov_Anton

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Since the beginning of this year, the CADJPY currency pair has been trading in the flat with the lower boundary of 89.9 and the upper boundary of 92.2. Last week, the price bounced up from the lower boundary of the flat.


Where will the price move in the nearest future?

 

In recent months, there are very high prices (at the level of historical maximums) for many of Canadian exported goods: oil, gold, wheat, and many other. Export revenues inflows lead to growth of the Canadian dollar.

 

Yesterday, CADJPY has been encouraged to growth also by the Bank of Canada. The financial regulator put the shift to the monetary policy tightening off but at the meeting of 2 March it raised the rate by 0.25% to 0.5%. Inflation at the level of 5.1% clearly indicates that the rate increase will continue. Also, at the nearest meetings, the issue on the reinvestment stop of funds from bonds redeemed under the QE will be considered.

 

For the yen in the current situation, the only growth factor is the protection status of the Japanese currency. Since the country is one of the largest resource importers, the pressure on the Japanese economy from rising global inflation is growing. By and large, the Bank of Japan has nothing to respond to inflationary challenges: even a negative interest rate does not help much the economy. And if the rate is raised, a recession along with stagflation is possible which is obviously not included in the plans of the Japanese regulator.

 

Following the rate hike by the Bank of Canada, the CADJPY currency pair showed a strong rise by 1.4%. Now, the price has updated the February maximum above 91.71 and continues its growth. The immediate target of growth will be the maximum of 2022 at 92.2. If it is possible to consolidate higher, a possibility of reaching the level of 93, the maximum of last year be viewed.

 


The following trading strategy can be viewed:

 

A buy of CADJPY at a price in the range between 91.5 and 91.7. Take profit 1: 92.2. Take profit 2: 93. Stop loss: 91.2.

 

In the situation of increased instability of the economic and geopolitical situations, it is advisable to fix the majority of the position when reaching the Take profit 1 level. Also, traders can use Trailing stop instead of fixed Stop loss as the price moves upwards.

Volkov_Anton
Volkov_Anton

Listed among the best MarketCheese authors
1st in the segment "Currencies"
2nd in the segments "Indices" and "Metals"
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