FxWirePro- Sell CADJPY on rallies

CADJPY trades weak ahead of BOC monetary policy today. It hits an intraday low of 106.76 with current trading around 106.83.

The Bank of Canada (BoC) is expected to make a big decision on December 11, 2024, with a likely 50-basis-point cut to its benchmark interest rate, lowering it from 3.75% to 3.25%. This would be the second month in a row that rates have been reduced due to ongoing economic issues. Canada’s unemployment rate has risen to 6.8%, the highest in almost eight years, leading many to call for more rate cuts to boost job growth. Economic growth also slowed to just 1% in the third quarter, falling below the BoC's target of 1.5%. Although inflation met the BoC's 2% goal in October, there are worries about keeping it stable during this economic slowdown. Most financial markets now see a high chance of the 50-basis-point cut after weak employment data. Major banks have changed their forecasts, expecting this larger cut to help support the economy.

Technical Overview: Navigating Market Trends

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, and 104.85.

Market Indicators: A Mixed Trend Signal

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: Selling on Rallies

Considering the analysis above, it may be prudent to sell on rallies around 107.38-40 setting a stop loss (SL) around 108, with a take profit (TP) target adjusted to 104.90. This approach aligns with current market signals and technical analysis.