The Canadian dollar, which had previously been supported by increasing oil prices and positive economic data, again came under pressure. The price of oil is rapidly decreasing because of the growth of oil extraction in the United States and the situation on the US stock market this week which have a significant impact on the situation on the market.
As a result of the stock market falling by 3.8-4.6%, which was caused by investors' fears about the growth of US bond yields, this week the demand for safe assets, especially for the JPY, has significantly increased. This led to an increase in the value of the yen, but to the strengthening of this currency also contributed convincing economic statistics, which indicate the continued growth of the economy of Japan. In particular, the PMI index in the service sector reached a 3-month high in January and amounted to 51.9 points, while the price index in the service sector rose to the level of May 2014. The PMI index in the manufacturing sector achieved 54.8 points, which is the maximum since February 2014.
Economic statistics in Canada disappointed investors and had a negative impact on the value of the CAD. The trade deficit amounted to 3.14 billion CAD, while investors expected a reduction of the deficit to the level of 2.2 billion. The largest negative balance the last 4 months is based on a record increase in imports, reaching a level of 49.7 billion CAD. The volume of imports grew by 1.5%, while the export growth rate was 2.5 times less. This ratio entails a further increase of the trade deficit.
At the same time, it should be noted that despite the negative news background the rapid decreasing in the value of the Canadian dollar did not happen. The rates consolidated in the range of 86.39-91.28 JPY since autumn 2017 and do not leave the frames of this range. The rates continue in the frames of an uptrend, but with signs of a flat trend formation. New growth in oil prices and new economic statistics in Canada, as well as the stabilization of the market as a whole, can again change the situation in favor of the CAD in the medium term. Therefore, special attention should be paid to the 86.39 and 91.28 levels, which are good entry points. If you open deals now the most optimal would be short deals in short-term trading.
