Should We Be Wary of the Canadian Dollar’s Upside Potential Against the Yen, as It Approaches Last Year’s Highs Despite Being Uncorrelated with U.S. Dollar Selling?

Should We Be Wary of the Canadian Dollar’s Upside Potential Against the Yen, as It Approaches Last Year’s Highs Despite Being Uncorrelated with U.S. Dollar Selling?

22.01.2024

Last weekend, the Canadian dollar extended its gains against the yen for the fifth consecutive day, despite the fact that Canada’s November retail sales figures—released on Friday, the 19th—deteriorated to -0.2% from 0.7% the previous month.Amid a market trend of yen and U.S. dollar selling, the CAD/JPY pair rose from 109.712 to 110.326, significantly surpassing this year’s high. Since the pair is now just a hair’s breadth away from last year’s high of 111.091, investors should remain cautious about a potential rally to new highs following a correction.

European currencies saw the pound fall against the yen after the UK’s December retail sales figures, released last weekend, showed a year-over-year decline of 2.4%—a deterioration from the previous month’s 0.1%—and the year-over-year figure excluding automotive fuel also came in lower than the previous month.GBP/JPY fell by approximately 2.5 yen, from 188.920 to 187.412. The decline halted as the pair found support at the 20-period moving average (MA) on the 4-hour chart. However, since the RSI on the daily chart is showing divergence, traders should remain cautious of further declines.

Today, China’s prime lending rate will be released at 10:15, Malaysia’s Consumer Price Index at 13:00, Taiwan’s unemployment rate at 17:00, Hong Kong’s Consumer Price Index at 17:30, and the Philippines’ retail sales and industrial production at 18:00,at 20:00, Israel’s manufacturing output; at 23:30, Turkey’s central government debt; at 24:00, the U.S. leading economic index; at 25:30, the U.S. 6-month Treasury bill auction; and at 30:00, South Korea’s producer price index growth rate.We should remain cautious about the upside potential of the Canadian dollar against the yen, which is approaching last year’s highs despite the lack of correlation with U.S. dollar selling.