On Friday, Bank of Canada (BOC) made another rate cut for the third time this month. The central bank lowered the interest rate by 50 basis points to 0.25%. This unscheduled rate cut is intended to provide support to the financial system and the economy during the COVID-19 pandemic. Prior to the cut, Canada has the highest rate among G7 countries. The central bank also announced two new programs: the Commercial Paper Purchase Program and the purchase of Canadian government securities in the secondary market. The government securities purchases will begin with a minimum of $5 billion per week, across the yield curve, the bank said in its statement.

The spread of COVID-19 is causing serious consequences for Canadian economy. With oil prices also continue to crater, it's likely that Canada could fall into a recession. BOC has stated that it is ready to take further action as required to support the economy and financial system. Meanwhile, the flight to safety amid concerns of the coronavirus spreading around the global could provide strength to the Japanese Yen. If the Canadian data continue to take a hit, CAD/JPY could see more weakness in the future.

CADJPY Weekly Chart Elliott Wave Update

The weekly chart of CADJPY shows that the cycle from December 8, 2014 high is incomplete. The move down is unfolding as a zigzag structure. Wave a ended at 74.83 low and wave b bounce ended at 91.77 high. The pair is currently in wave c, where it is unfolding as an ending diagonal.  While below 91.77 high, the pair can continue to extend lower. The 100% – 123.6% Fibonacci extension of wave a - b, where wave c can end is at 52.60-60 area.

CADJPY 3.28.20 4 Hour Weekend Elliott Wave Update

The 4 hour chart above shows that the bounce in wave (X) ended at 78.48 high, which is within the blue box area. From there, it has reacted lower. The pair now needs to break below wave (W) low at 73.76 to confirm that the next move lower is in progress. Otherwise, the pair can still do a double correction in wave (X).