Quotes continue in the frames of an upward trend, but have consolidated since last week in the range of JPY 90.093-91.313. Reaching the level of November 2015, the Canadian dollar can rise in price more thanks to increasing oil prices and long-term perspectives for further growth of the black gold's value. In particular, the head of the Department of indices of raw materials and real estate S&P Dow Jones Indices forecasts that as of 2018 on the market there will be some deficit for oil, causing rising demand in India and other countries. The price of oil could reach the level $80 per barrel. The same opinion is held by analysts from Citigroup Inc. In any case, the growth and stabilization of the prices for oil does not put pressure on the value of the CAD anymore.
The main factor which recently affected the value of the Canadian dollar is a very hawkish policy by the Central Bank of Canada. The rate has already been increased twice this year. It can be increased once again this year, considering the Central Bank's policy and the position of Canada's Finance Minister who said on Wednesday that there is reason for further changes of the rate, and thinks that at the moment the rates are at the historical minimum level. At the same time, the head of the Bank of Canada was unexpectedly cautious in his forecast this time, expressing doubt that the interest rate will change in the near future. According to the latest data, inflation and salaries in Canada are significantly below the target level. Rising oil prices have changed the situation in the economy and could support the CAD. This is why investors began to doubt the probability of a new rate hike this year.
As for the Japanese yen, the potential for its strengthening is limited and depends on the geopolitical situation. It especially depends on the situation on the Korean Peninsula. This week, the yen came under pressure due to weak economic data: the index of household expenses was in August only 0.6% against expectations of 1% YoY, retail sales amounted to 1.7% against the expected 2.6% YoY. The only positive factor was growth in industrial output by 2.1% after declining last month by 0.8%. But the main negative factor was the political situation in Japan, where the Prime Minister Abe dissolved Parliament and called early elections to be held on October 22. Political instability certainly had a negative impact on the value of the yen.
Despite the long-term perspectives for the further strengthening of the CAD, at the moment there is a possibility of a flat trend. If the price of oil does not rise rapidly and if the Bank of Canada in October does not raise interest rates, the yen has a chance to strengthen. At the moment the most optimal would be the deals to SELL to get the profit on the nearby price correction, which is confirmed by the Stochastic oscillator. We also need to pay attention to the entry points 90.093 JPY and 91.313, the achievement of which will indicate the exit from the consolidation phase.
