What does the CAD/JPY chart say about omicron?
CAD/JPY a good proxy?
There are plenty of moving parts in the omicron trade that make it a challenging one. The Fed showed that today as Powell’s hawkish comments added to a risk-off mood that spilled over into everything.
I don’t think there’s a true way to isolate omicron in a major market. Perhaps there are some vaccine stocks or travel stocks that fit the bill but everything else is infected by cross-asset prices.
For CAD, oil and gas are considerations. Both have been hit this week and the OPEC+ meeting on Thursday looms large. The yen is a classic funder and safe haven and does a good job of capturing overall sentiment. CAD/JPY has also been a great momentum and divergence trade this year.
So what’s the chart show?
So far, it’s stopping exactly where you might expect. Since the delta bottom it today tested the 61.8% retacement level. That held and there’s been a moderate bounce late in the day.
That leaves the pair at a bit of a standstill but at least the bulls can manage risk around 88.00. The next BOC meeting is December 8 and that will be an interesting one as Macklem tries to sort out what’s happening with the variant and inflation.
Overall, I think this chart shows the caution in the market but also some sense of wait-and-see.