CAD JPY

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Latest CAD JPY Analysis and Forecasts

These S&P Relative Developments Reinforce A Risk-Off Restoration

A great deal is going on in the macro department and this can make it difficult to understand where risk is flowing in broader market as well as the G-10 FX space. A constant back-and-forth between virus related risks and U.S.-China tensions is continuously squeezing equity rallies which has somewhat seeped into G-10 FX risk proxies, stalling rather buoyant rallies. We take a look at two relative ETF charts that are catching our attention and question possible resumptions in risk rallies.

SPY/GLD (S&P 500 vs. Gold)

  • Gold trades at its highest levels since October 2012, maintaining its well-established bid tone, even as the USD rallies off its lows.
  • Steepening Gold outperformance theme has caused the SPY/GLD relative to break through two bull fibo fans, which have acted as great relative sup/res lvls. This has opened the final 61.8% fib fan line.
  • A breakdown through the final line would suggest continued S&P underperformance, proposing a wider risk-off theme is potentially taking control of mkt.
SPY/GLD

SPY/IEF (S&P 500 vs. 7-10year Treasury Bond ETF)

  • SPY/IEF provides insight into Stocks performance vs. tier 1 safe haven bond mkts.
  • Mkt is breaking lower, with a slip in equities causing a breakdown through relative mean-reversion.
  • SPY/IEF has pierced to new month lows, reinforcing our work in SPY/GLD which suggests a rotation in relative risk.
  • Continued losses would suggest a broader bid in Treasury’s, potentially reinforcing a deeper risk-off tone in global markets.
SPY/IEF

WHAT THIS MEANS FOR FX:

  • Spot Gold: managing to hold above the 1765 high breakout point, opening immediate upside risks to the 1795/96 zone. This is covered by the 61.8% fib ext. and Oct 2012 high. Above here would open 1825. Fundamentally, it may support a rise in virus fears, whether it be an increase in cases/deaths or a diminishing economic outlook due to virus.
spot gold
  • We’d expect to see a JPY bid pop through with JPY/XXX being affected, namely AUD/JPY, NZD/JPY and CAD/JPY.
  • This ties in with AUD and NZD being significantly affected by the risk-aversion. 
    • AUD/JPY is the focus chart. Breakdown below 72.49 SUP and subsequent selling through 200-EMA @ 72.25 could reinforce a risk-off dynamic has poured into G-10 FX pairs and we’d suggest being short risk.
audjpy

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CAD/JPY – Live and Historical Rates

The Canadian Dollar and the Japanese Yen are two geographically very distinct currencies, that do not form a major Fx pair, despite the fact that the Yen is a major currency indeed. The CAD on the other hand isn’t. The currency chart above illustrates how many JPY one needs to buy a CAD.

The CAD

Supported by the 10th largest economy in the world, the CAD is essentially a reflection of the country’s close ties to the US. Over 80% of Canadian exports go to the US, which is where around 50% of its imports originate, too. Interestingly though, Canada is still under the authority of the British monarchy. A floating currency since 1970, the CAD hasn’t really been tampered with control-wise since 1988. The authority that would undertake any such interference is obviously the Bank of Canada. The Canadian Dollar is the 7th most traded currency in the world.

The JPY

Introduced in 1871, the Japanese Yes started out as a unit of the dollar. The currency replaced by the Yen was the mon-based Tokugawa coinage of the Edo period. The first great devaluation of the Yen came in 1873, only two years after its introduction, ushered in by the devaluation of silver, which represented its standard. Since the US dollar adhered to the gold standard, the devaluation of silver didn’t impact it. The value of the Yen thus fell to USD 0.50, where it remained till 1931, as Japan adopted the gold standard too. After 1931, the gold standard was abandoned. In 1973, the yen became a floating currency. Due to its favorable interest rates, the yen has traditionally been used by Fx traders for carry trades.

CADJPY Analysis

Given how both Japan and Canada have the US as their biggest trading partner, the biggest influence upon the pair is exercised by the US economy.