Yooo the Loonie just dropped hard against its major counterparts!
Will this lead to a pullback in the next trading sessions?
Check out CAD/JPY’s range play!
Before moving on, ICYMI, yesterday’s watchlist checked out USD/CAD’s potential bullish flag pattern ahead of Canada’s manufacturing PMI release. Be sure to check out if it’s still a good play!
And now for the headlines that rocked the markets in the last trading sessions:
Fresh Market Headlines & Economic Data:
Canada’s manufacturing sector contracts further, down from 49.6 to 48.8 in June output, new orders, and employment registered declines
NZ GlobalDairyTrade dairy auction prices fell sharply overnight continuing the downward trend that started in March 2022
The ANZ World Commodity Price Index fell 2.3% m/m in June after 0.4% increase in May
Australia’s retail sales up by another 0.7% in May (vs. 0.7% expected and previous) as consumers take advantage of promotions and sales events
China’s Caixin services PMI expanded at a slower pace (from 57.1 to 53.9) in June amidst steeper deflation, high youth unemployment, and sluggish foreign demand
Australia’s retail sales up by another 0.7% in May (vs. 0.7% expected and previous) as consumers take advantage of promotions and sales events
China’s Caixin services PMI expanded at a slower pace (from 57.1 to 53.9) in May amidst steeper deflation, high youth unemployment, and sluggish foreign demand
France’s industrial production rose by 1.2% m/m in May after a 0.8% uptick in April
Spain’s HCOB services PMI dipped from 56.7 in May to 53.4 in June, “persistent wage pressures remained the principal driver behind higher input prices”
France’s HCOB services PMI drops from 52.5 to 48.0, the strongest pace of decline since February 2021, as demand falters
Germany’s HCOB final services PMI fell from 13-month high of 57.2 in May to 54.1 in June
Price Action News
Overlay of CAD Pairs 15-min
There were not a lot of market movers during the Asian session but China did make headlines when the Caixin services PMI report came in weaker than expected in June. This reinforced concerns that high interest rates might kill demand and put major economies in recessions.
Major FX pairs were in tight ranges until the start of the European session when China’s headlines and overall risk aversion dragged high-yielding bets lower.
CAD, which may have taken an extra beating from crude oil prices pulling back from yesterday’s highs, dropped sharply against its major counterparts.
U.S. factory orders at 2:00 pm GMT
FOMC meeting minutes at 6:00 pm GMT
Australia’s trade balance at 1:30 am GMT (July 6)
Use our new Currency Heat Map to quickly see a visual overview of the forex market’s price action! 🔥 🗺️
CAD/JPY 15-min Forex Chart by TV
There were no major reports out from Canada in the last few hours, but that didn’t stop CAD traders from selling like there’s no tomorrow!
CAD/JPY, for example, dropped like a rock from its consolidation just under 109.40 all the way to the 108.70 previous support area.
Here’s what’s interesting about 108.70. As you can see, the level lines up with a range support level that hasn’t been broken since last week. Not only that, but it’s also near the S3 (108.67) of today’s Pivot Points.
Meanwhile, Stochastic is also in favor of some buying as it hangs out in the oversold territory.
Think CAD/JPY is done falling for the day?
Most U.S. session traders will trade their first July trades today after a long weekend. If today’s flows translate to risk-taking, then CAD/JPY’s range support could hold.
CAD/JPY could push back up to 108.84 if not the 109.00 mid-range zone.
But what if the risk aversion persists?
Keep an eye out for a clear break below the 108.70 area, which could lead to CAD/JPY revisiting previous areas of interest like 108.40 or l08.00.
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