The Canadian dollar jumped over the crucial 200 Day EMA against the Japanese yen on Monday, as traders continue to flock to the carry trade in general.
CAD/JPY
The Canadian dollar has rallied rather significantly during the trading session on Monday here to break above the 200-day EMA, showing signs of real strength. Ultimately, this is a market that I think, given enough time, will probably continue to find buyers on dips, and I also recognize that breaking above the 200-day EMA is a big deal. The 200-day EMA often will be used to determine the overall trend of a market, and as a result, the fact that you break above there means people start to look at it through a positive trend.
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Yes, the Bank of Japan has gotten involved a couple of times to intervene against the depreciation of the Japanese yen, but it is starting to look more and more like this is a bit of a waste of time for them.
Central Bank Policy and Commodity-Backed Support
After all, the interest rate differential still favors pretty much anything against the Japanese yen, and they have to worry about things like massive amounts of debt and other central banks around the world probably having to tighten. In fact, for example, the Federal Reserve, despite the fact that we've got bad news out of the US recently, is still expected by a 55% chance to raise rates next month. So, we'll see.
The Canadians, of course, are backed by oil, and oil has been important over the last couple of months for obvious reasons in the Persian Gulf. So, it does make sense that we continue to see more or less a buy-on-the-dip attitude here. I like buying dips. I do not want to own the Japanese yen under any circumstance, and therefore this chart makes perfect sense to me.
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