Canadian Dollar to Strengthen on Recovery in Crude Price

Canadian DollarThere is a substantial decrease in the price of crude oil and it has a very bad impact on the Canadian Dollar over the past two weeks. On the contrary, there are increased demands for safe haven currencies like for instance Yen because of the Republicans failure to repeal Obamacare and political uncertainty in Europe. The currency pair CAD/JPY moved from a high figure of 85.26 to 82.22 in a time span of 14 days. There are possibilities of a bullish reversal in the CAD/JPY pair and we have enumerated reasons below.

There is an increase of 0.4% in the core consumer prices in Canada on month on month basis in February. The data is provided by Statistics Canada and the figure beats the estimates made by analysts with a consumer price increase of just 0.1%.

The reading of Consumer Price Index (CPI) in the last month increased 0.5%. It is to be noted that one week earlier, there were reports of 1.7% month on month increase in retail sales by Statistics Canada in the month of January. The increase was more than the expectation of the market by 1.3% growth and better than previous month downwardly revised 0.5% decline.

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The crude oil prices on Tuesday hit a one-week high figure of $48.73. The prices of Crude Oil boosted because disruptions in Libya’s crude oil production and the possibility of 6 months extension to the production limiting agreement signed between OPEC and oil producing nations in the month of December 2016. So, the Canadian Dollar is always favourable to the increase in the prices of crude oil similar with the US Dollar.

In Japan, there is 0.1% year-on-year increase in the February retail sales compared with 1% growth in the last month. According to analysts, they have anticipated an increase of 0.5% in retail sales. Since October 2016, it is the weakest increase. On a month to month basis, there is 0.2% growth in retail sales instead of 0.5% in earlier months. The consumer confidence index increased in the US to a 16-year high figure of 125.6 in March from February’s figure of 116.1. This would certainly weaken the Yen currency and strengthen Greenback. As a result of this, a rally in the currency pair CAD/JPY can be expected.

The currency pair of CAD/JPY seems to have found support at 82.40. The momentum indicator shows a positive divergence with the price and supports the argument. Hence, a long position in the counter is likely to have a minimum risk.

CADJPY Pair March 30th 2017

CADJPY Pair March 30th, 2017

As a currency trader, you can open a long position near 83 and put a stop order below 82. You can sell the long position near 84.40.

You can purchase a call option and it will create a replica in the currency market. We would advise you to trade near 83 on the OTC market and the expiry period date should be somewhere around 8th April.


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