Welcome to another week of forex trading! In today’s FX feature is the daily cast of the CADJPY. As you can see from the chart, the pair broke down from a descending triangle pattern. Since then, it has been trading between 78.60 and 81.70. Last Friday, we the Canadian dollar rallied against the Japanese yen to push the CADJPY pair closer to where the former support of the triangle. In my view, there is still some room for the pair to move higher although it could turn back when it hits a resistance at this former support. If it does, it could fall back to around 78.60.
The Bank of Canada will hold its monetary policy decision this coming Wednesday (September 8). The bank is expected to raise its interest rate to 1.00% from 0.75%. But like what I said in my title, there’s an outside chance that the BOC could surprise the markets by not hiking its benchmark interest rate.
Let’s us check Canada’s recent economic data to see why. First of all, the country’s unemployment rate unexpectedly rose to 8.-% from 7.9% with firms cutting about 9,300 jobs. Its Ivey PMI, which gauges the activity of both manufacturing and sercies industry through the eyes of purchasing managers, also dipped by several notches to 54.0 from 58.9. More importantly, Canada’s wholesale and retail sales have continued to suffer with the former slipping by 0.3% and the core retail sales sliding again by another 0.5%. As a result, the country’s core CPI for the month has also slipped by 0.1%.
The above data shows that the situation as of the moment does not merit a rate hike as of yet especially with the unexpected slide in the latest month-ever-month CPI. The Loonie would almost surely take a hit if the BOC surprises the market by not raising its interest rates. But in case it does, the Canadian dollar could still trade on a range bound fashion or even fall since a rate hike is already forecasted and priced in by the market.