The Canadian Dollar and the Pair's Outlook

The Canadian Dollar at the Fundamental Level

The Canadian dollar rose against the Japanese yen on Wednesday, while yields on 10-year Canadian government bonds (CA10YT=RR) fell by 1.8 basis points to 3.512%.

First-quarter GDP data showed that the Canadian economy slipped into a surprise technical recession.

On the other hand, the dollar-yen exchange rate is now approaching 160.70 yen, a level well known to traders, as it was at roughly this level that Japanese authorities intervened in the market, selling tens of billions of dollars in an attempt to halt the yen’s decline.

Reports indicate that Japan spent a record 11.7 trillion yen, or approximately $73 billion, on currency market intervention between April and May.

CAD/JPY on the technical level

The CAD/JPY pair is trading near the 115.20 level and is attempting to reach levels that would complete the Bat harmonic pattern near the 115.50/60, at which point the pattern will be complete and the pair will also reach the downtrend levels on the 4-hour chart.

We expect that once the pattern is complete, the pair will begin to decline again, targeting 115.10 and then 114.70 at the very least.

This scenario will fail if the pair breaks above 115.80.