The rates are in the mode of extremely high volatility due to multidirectional macroeconomic statistics, as well as tension because of the trade war. The market is still afraid of the development of trade war and reacts to any news. As a result, optimism is rapidly changing to panic which leads to a sharp increase in demand for safe assets. Additional instability in the market is the unpredictable behavior of the President of the United States, who can shift from a moderate rhetoric against his trading partners to an extremely aggressive stance. In particular, after the reduction of tension in the market and optimism in all stock markets, on Monday, the opposite situation was observed due to the threats of Donald Trump to introduce new duties against China, worth more than $200 billion, if China does not refuse to respond to the previous package of duties.
Canada, who is also under the influence of the trade duty on steel and aluminium, has imposed retaliatory duties on some US goods. At the moment, there is a contradictory situation for the Canadian economy. Recent reports showed rising unemployment in Canada to 6%, but at the same time, the number of jobs increased by 31.8 thousand. In addition, Canada has an increased deficit in the trade balance, where the import is growing, but the export volume remains at the same level. This increase in the long term shows a negative trend for the trade balance. At the same time, real estate market data shows positive dynamics in the economy. In particular, the number of building permits issued in May increased by 4.7%, exceeding expectations in the market by 4 times, and the indicator of seasonally adjusted housing starts increased to 248.1 thousand units, which is also higher than expected. The Ivey PMI index in the services sector rose to 63.1 points, which is slightly below expectations. The situation on the oil market is stable, and prices are at an acceptable level for market participants. There is a high probability for the flat trend formation. On the one hand, oil is under pressure due to a new round in the trade war between the US and China, while on the other hand, oil is supported by a reduction in oil reserves in the US and disruptions in supplies from Libya, Venezuela, and Iran.
As for Japan, the situation in the economy is optimal. In addition, the yen is gaining as a safe asset, the demand for which may increase in the future. However, the extremely soft monetary policy of the Bank of Japan does not support the exchange rate of the JPY. In Canada, monetary policy is the exact opposite. The Bank of Canada is expected to raise the rate for the fourth time in a year, despite a number of risks for the Canadian economy associated with the worsening of trade relations with the United States. Increase of the rate will certainly support the CAD in the short term.
At the moment, we are already seeing a strengthening of the CAD against the JPY, which began two weeks ago. In the near future the trend will continu, and there is a high probability of the resumption of the upward trend. In the current situation, the most effective would be the deals to BUY, which is also confirmed by the Stochastic oscillator. If you focus on the Fibonacci levels, you can also determine that the rates are in the range of 38-50%, which is also a signal to open the deals now.
