The Canadian dollar currency has remained under pressure against the Japanese yen, as weak oil prices and increased risk-off trading sentiment keep the pair contained towards the current monthly low.
Both Brent and crude oil underperformed this week, which has kept the Canadian dollar pressured ahead of this week’s key jobs report from the Canadian economy that is predicted to show that a big drop in the unemployment rate and around 175,000 new jobs created.
Another factor that is weighing on the CADJPY pair is risk-off trading sentiment from COVID-19 Delta variant fears. The pair is extremely risk sentiment, due to it being a commodity currency pitted against a safe-haven currency.
The CADJPY pair performs extremely well during times of risk-on market sentiment and rising oil prices, however, it tends to get hot severely during times of market uncertainty and risk-off sentiment.
Currency trading is based on the foundation of pitting strength against weakness or weakness against strength when trading currency pairs. Shifts in market sentiment can happen quickly on news developed, hence why the CADJPY pair has remained under pressure this week with the bearish oil and news developments.
It should be noted that retail sentiment data currently shows that there is a massive one-way bearish skew towards the CADJPY pair right now. The ActivTrader Market Sentiment tool shows that some 82 percent of traders are bearish towards the CADJPY pair right now.
This is very encouraging for upcoming strong gains in the CADJPY pair as fading herd sentiment is often a profitable counter strategy. Historical data has shown that fading one-sentiment skews amongst the retail crowd has proved to be very lucrative.
CADJPY Short-Term Technical Analysis
The four-hour time frame shows that the Relative Strength Index indicator and the Commodity Channel Index indicators are both issuing a buy signal so a counter rally could begin.
It should be noted that the short-term trend remains bearish while the price trades below its 200-period moving average, around the 88.45 resistance level, so buying dips remains risky.
CADJPY Medium-Term Technical Analysis
Looking at the daily time frame the CADJPY pair is trading inside a descending broadening expanding wedge pattern, which is one of the most bullish reversal patterns.
Looking closer at the pattern the wedge pattern is located between the 85.80 and 89.00 levels. This indicates that a 300-point move will take place once the price breaks from the wedge pattern.