The rates continue in the frames of an upward trend, but on the chart we can see the formation of a weak downtrend. This formation is based on the decreasing of oil prices and the worsening of trade relations between the United States and Canada. This week the Japanese yen continued to strengthen due to positive data about the economy. The country's GDP unexpectedly grew in the second quarter by 1%, while we expected a growth by just 0.6%. This is the most rapid growth in Japan's economy for more than two years. We hadn't seen such a significant growth since the first quarter of 2015. In annual terms the GDP growth was +4%, exceeding forecasts of 1.5%. It should also be noted that Japan's GDP grew for the sixth quarter in a row. The consumer spending indicator increased by 0.9% in Q2, exceeding the expected level almost twice. The volume of industrial production in June rose by 2.2% against expectations of 1.6%.
Thus, amid extremely positive statistics from Japan it was very hard for the Canadian dollar to resist the yen. The strengthening of the JPY would have been even more rapid, but this was prevented by the factor of geopolitical tensions between the United States and North Korea, although the situation has normalized to the usual level these week.
Today the market is waiting for information on Canada's index of consumer prices for July, but likely it's not necessary to expect a significant strengthening of the CAD, given that oil is decreasing again due to information about reaching the maximum levels of shale oil extraction in the United States over the past two years. Crude oil stocks fell significantly this week, but the increase in oil production will lead to the rapid recovery of oil reserves. In addition, analysts have lowered their forecasts about the demand for oil in China. It should be noted that If China started a massive shift to electric transportation, in accordance with the global trend, it would negatively impact the demand for oil in this country in the future.
The MACD and Stochastics oscillators give contrary signals. In this situation the most optimal course of action would be to open the short deals upon medium term trading. For those who use short term strategies it's possible to open the deals to BUY, in accordance with the Stochastics's signal making a profit on the price correction.
