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CAD/JPY: Fundamental Review & Forecast

Published on: 24/03/2017

The CAD/JPY rates continue to be in the frames of the downtrend. The Japanese yen has strengthened against the Canadian dollar since the end of last year, but this month after oil prices fell for several days from 54 to 47 dollars a barrel, the Canadian dollar fell in price against all currencies and nothing could stop this fall. The Canadian dollar hasn't fallen as quickly as the oil. Nevertheless, it lost more than 2 yen in price.

The oil market comes to impasse: the increase of oil prices as a result of the hard-to-achieve agreement on the reduction of oil led to increase of oil production by countries which are not a part of the cartel. The number of drilling rigs in the US reached record levels and increases the volume of oil on the market. This negates the efforts of OPEC to stabilize prices, and even if it's done again, the prices would decrease once more because manufacturers will immediately start to increase production for profit. Though everybody understands that more oil on the market means a lower price. This makes doubtful the further perspective for the CAD.

On the other hand, Canada's economy remains very strong, and pleasing investors with its indicators, even exceeding their expectations. Recent statistics showed an increasing of retail sales and increasing industrial production, though this certainly did not affect the value of the Canadian dollar, which has no chance against the Japanese yen at this moment. JPY doesn't have the same pressure and the decrease in oil prices is only a positive factor. In addition, the yen is on the rise under the positive statistics on exports, imports and trade balance.

CAD/JPY, H$ chart
On the CAD/JPY chart we can see a rapid downward trend, although there are no preconditions for further strengthening or falling of the Canadian dollar. We can't expect further rapid decreasing of the oil prices and this could allow the Canadian dollar to stabilize the price. In this situation we may trust the MACD oscillator and open the deals to BUY.

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