- You can see that the Canadian dollar is on the verge of collapsing against the Japanese yen yet again.
- As we are threatening the ¥102 level, zooming out on the chart reveals just how dire this situation is because it opens up a move down to 100 pretty quickly.
- This would be a significant event to say the least at this point in time.
After that, we could be talking as low as 95. This makes a certain amount of sense considering that Canada is in the middle of a tariff war, evidently with the United States and China. This will have ramifications on the Canadian economy. Furthermore, there is a lot of political uncertainty in Canada, and therefore, it all ties together, making it quite logical that we would see Canadian dollar weakness overall.
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The Yen is Strong. Period.
This is especially true when looking at it against the Japanese yen, whose central bank will probably be tightening monetary policy. Unfortunately, there will likely be many traders willing to jump in and buy this dip because it represents significant support, but the fundamentals do not align with such a move. In fact, unless something changes drastically with the Japanese currency itself that would make it absolutely toxic, any rally at this point is likely just going to provide a better entry point for shorting the Canadian dollar against the Japanese yen.
I am paying particular attention to the ¥104 and ¥105 levels. That being said, any bounce is likely to struggle to maintain anything above that area. Even that might be difficult at this point. The interest rate differential does favor the Canadian dollar, but Canada does not offer much in the way of interest. It is probably not going to be enough to make the selling pressure go away anytime soon.
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