The CADJPY is looking to close lower at the 100.00 level for the second time in less than a week. That could see some bearish action in the pair after the Japanese inflation release on Wednesday.
CADJPY – Daily Chart
Support for a move lower in the pair comes in at the 99.00 level, where a 50 moving average sits, and getting below opens a deeper correction.
The selling of the Canadian dollar came after a weaker inflation number, making an interest rate pause more likely. Canada’s annual inflation eased more than expected in January to 5.9%, according to data on Tuesday. A price slowdown should allow the Bank of Canada to keep interest rates steady at its next meeting as it lets the market absorb previous rate hikes.
Analysts expected inflation to slow from 6.3% to 6.1% in December. The monthly reading saw the consumer price index rising 0.5%, Statistics Canada said, which was also lower than analysts’ forecast of a 0.7% gain after a 0.6% decline in December.
The latest reading “allows the BoC to stay on hold in March, despite the fact that the labor market was extraordinarily hot in the month of January,” said Andrew Kelvin, chief strategist at TD Securities.
The market will then have Japanese inflation reading on Thursday, with last month’s number rising again to 4%.
The market is not expecting any change from the BOJ after the central bank skipped rate hikes while other global policymakers ramped up borrowing rates. Now that those banks are slowing, the BOJ can leave rates unchanged and allow some higher prices to be absorbed after years of deflationary pressures.
At The Economic Club of Washington, Powell said the “extraordinarily strong” January job report surprised the Fed. Oil prices remain weaker under the $80 level, which has also kept a lid on the progress of the CAD.
