CAD/JPY showed a minor sell-off on the strong Canadian dollar. It hit an intraday high of 104.982 and is currently trading around 104.50.
Canada's inflation rate quickly increased in February of 2025 to 2.6%, exceeding the Bank of Canada's 2% midpoint goal for the first time in seven months due primarily to the end of a sales tax holiday causing a widespread increase in consumer prices, with prices rising month to month by 1.1%. Core inflation measures also reflected concerning trends, with the CPI-median and CPI-trim rising to 2.9%. Large increases were recorded across different categories, including food, clothing, transport, and shelter. This unexpected increase, greater than analysts expected, puts it at a difficult situation for the Bank of Canada to decide on monetary policy, particularly on interest rates, with Governor Macklem pointing out inflation control amid uncertainty over U.S. tariffs and trade policy.
Technical Analysis
CAD/JPY is currently trading above the 34- and 55-EMA on the 4-hour chart. The immediate resistance is at 105; a breach above this level could shift targets to 106/107.40/108/108.35/109.30/110. On the lower side, near-term support is at 104 and a break below this support could lead to declines toward 103.60/102/101.50.
Indicator Trends
CCI (50)- Bullish
ADX (14)- Neutral
Trading Strategy Recommendation
It is good to sell on rallies around 103.25-30 with a stop-loss set around 104 and a target price of 101.60.
