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.
