The rates continue within the downward trend amid the development of the trade conflict between China and the United States, the actual stop of negotiations to resolve the conflict, as well as the falling in oil prices, and the growing demand for safe assets.
This week the negative tendency continues. The market is still dominated by pessimistic sentiment. Oil prices continue decreasing and have already started testing the minimum of $50 (CL/WTI). In particular, yesterday oil fell in price with new data on oil reserves in the United States, which, contrary to expectations, increased by 3.5 million barrels. The rapid decline in prices increases the probability of extending the trade agreement to reduce oil, but there are also countries against this. The US President, who is also against the rise in oil prices, is trying to influence OPEC. Russia is also not eager to extend the agreement.
Decrease in oil prices has a negative impact on the Canadian dollar. The CAD also remains under pressure as a commodity currency. However, this week we can see a strengthening of the CAD within the price correction. In many ways, this is due to negative trends in the Japanese economy: business activity is declining; the consumer confidence index fell in May for the eleventh month in a row - to 39.4 pips, which is the lowest level since 2015.
Thursday and Friday will be the key days for this currency pair. We expect the publication of the latest data on unemployment in Canada, the trade balance, as well as the publication of the household expenditure index in Japan. On Saturday, the head of the Bank Of Japan will make a speech, but only on Monday the market will be able to react to this. In any case, the negative trends on the market will provide the Japanese yen with support in the near future. Volatility will gradually increase as we approach the OPEC meeting and its outcome. We suppose that the price correction is not yet completed and the deals to BUY remain relevant until the end of the week. However, in the long term the most effective would be the deals on the trend, which is also confirmed by the Stochastic oscillator.
