CAD/JPY: Fundamental Review & Forecast
Starting from January we have observed the rates within the upward trend. The Canadian dollar received the necessary support by rising oil prices and reducing the risks associated with the trade conflict between the US and Canada. At the same time, the economy remains at the optimal level, although it is not in the stage of active growth.
The upward movement continued this week. Demand for risky assets has increased significantly this week with positive signals from the United States on the prevention of a new shutdown in the government. The cost of oil increased not only thanks to rising interest in risky assets, but also due to the active reduction of oil extraction in OPEC countries, taking into account the sanctions against Venezuela and Iran. At the same time, the negative forecasts for a decrease in oil demand, as well as forecasts about a significant increase in oil extraction in non-OPEC countries, including the US and Canada, do not prevent the increase in oil prices for a while.
The Japanese yen decreases against most currencies at a time when investors pay more attention to risky assets. Japan's economy continues to be in a recession. This is evidenced by the latest data: the PMI index in the services sector fell by 0.3%, that is significantly more than expected on the market. The Producer price index grew by only 0.6%, which is the lowest growth rate in more than 12 months. Thus, there are no signs of increasing inflation and economic activity in Japan. The main signal for investors will be the data about Japan's GDP for the 4th quarter of 2018, which will be published tomorrow. The GDP is expected to recover by 0.4% after a decline by 0.6% in the previous period.
The Stochastic and RSI oscillators signal the rates in the overbought zone, which inclines us to make deals to SELL. As part of the price correction, we can expect a decline to the level of 83.1 JPY and 82.75 JPY in the long term.