CAD/JPY Faces Pressure After Soft Canadian CPI: Market Signals and Technical Trends

CADJPY trades weak after weak Canada CPI. It hit an intraday low of 107.18 and currently trading around 107.27.

Canada's CPI Report: Inflation Trends and Economic Outlook

The Consumer Price Index (CPI) data for Canada shows that prices rose by 1.9% in November 2024 compared to the same month last year, down from 2.0% in October. There was no change in the CPI from October to November after a 0.4% rise the month before. Core inflation, excluding gasoline, increased by 2.0% year-over-year, slightly lower than the 2.2% gain reported in October. Prices for travel tours and mortgage interest contributed to slower price growth, while grocery prices went up by 2.6%. This data indicates a cooling trend in inflation, which could affect the Bank of Canada's monetary policy moving forward into 2025.

Technical Overview: Navigating Market Trends for CAD/JPY

From a technical perspective, CADJPY is currently trading below the 34- and 55-EMA on the 4-hour chart. The immediate near-term resistance sits at 107.60, and a breach above this level could see targets shift to 108/108.52/108.65, 109, 110, and ultimately 112. Conversely, immediate support is noted at 106.70; a breach below this support could lead to declines toward 106.20, 105.70 and 104.85.

Examining the 4-hour chart indicators: the CCI (14) is bullish, while the ADX indicates a  neutral position. Overall, the indicators reveal a mixed trend, suggesting caution in trading decisions.

Trading Strategy: Prudent Selling on Rallies with Clear Targets

Considering the analysis above, it may be prudent to sell on rallies around 107.38-40 setting a stop loss (SL) around 108.50, with a take profit (TP) target adjusted to 104.90. This approach aligns with current market signals and technical analysis.