CADJPY had been trading inside a descending triangle pattern on its 4-hour time frame before the pair made a break below support. This suggests that further losses are likely, possibly triggering a downtrend of around 400 pips or the same height as the chart pattern.

The 100 SMA is below the 200 SMA on the 4-hour chart, confirming that the path of least resistance is to the downside. However, stochastic is already indicating oversold conditions, which means that a bounce back to the former triangle support at 94.00 is possible or even a move until the resistance at 95.00. RSI is also in the oversold area, suggesting that a pullback is likely.

If the downside break proves to be a fakeout, the pair could head back inside the triangle and possibly go for an upside break. In that case, a 400-pip rally could bein the cards.

Data from the Canadian economy has been mostly weaker than expected, with the monthly GDP reading showing a 0.2% contraction and confirming that a recession is taking place. Later on this week, Canada will release its July jobs report and its Ivey PMI reading.

Hiring is expected to pick up by 5.7K in July, a rebound from the previous month’s 4.6K decline. The unemployment rate is slated to hold steady at 5.8% while the Ivey PMI could show an improvement from 55.9 to 56.2, reflecting a stronger pace of expansion in the industry. Weaker than expected data could spur more losses for the Loonie, especially if oil prices are also tumbling by then.

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As for the Japanese yen, there have been no major reports out of the country so far this week, leaving risk sentiment in play. Risk-off moves could continue to favor the Japanese yen, depending on how global equities and commodities fare.

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