Sleepy Canada and slumpy Japan was the Friday-to-Friday forex trade this week.
FX performance versus USD this week
The best trade this week was buying CAD/JPY. What’s next?
The Canadian dollar was the leader while the yen lagged. All the focus was on the Fed decision, ECB TLTRO, Scottish referendum and the SNB decision but these were the headlines that mattered:
- PBOC pumping 500bn yuan through SLF to top 5 banks
- Poloz getting optimistic on Canada
- Japan to lower economic estimate (they followed through today)
The Canadian CPI numbers today gave the loonie a final flourish but it’s since evaporated.
What’s the lesson in this?
If you strip out all the volatility, hype and headlines it’s all about growth. The Bank of Canada talked about better growth and Japan warned about slower growth.
What’s next? There’s a doji shaping up on a few Canadian dollar charts today and the hype-train in the stock market is looking a little overdone. I worry about a slide in risk trades so I’d take profits on CAD/JPY longs and look for some downside.
(Warning: tire pumping ahead) I’ve been touting CAD/JPY longs since they broke out.
