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Day five: our potential CAD/JPY trade

The CAD had a strong rally overnight, hitting a high of 96.23 after US payrolls smashed expectations.

Yen
Source: Bloomberg

What’s more, the inflationary aspects of the US jobs report were fairly benign and this would give little reason for the Fed to hike rates sooner, another positive for risk assets. The Canadian trade balance showed a narrower deficit than expected as well, so this would have assisted the CAD’s strength.

The potential trade idea is performing well and it’s tempting to take profits on the trade, however there are no clear signs that the trend has come to an end. On the daily chart the nine-day RSI is overbought, so this may come into play, however I continue to hold a long bias and feel moving stops to 95.50 (just under the 61.8% retracement of the rally from July 2) could make sense.

As you can see from the hourly chart the pair is holding the 23.6% retracement of this mentioned move at present, so we may well see a fresh move towards the 96.50 level in the short-term.

Spot FX CAD/JPY chart
Click to enlarge

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