Over the past year, the rate was within a flat trend in the range of 79.055-84.567 JPY. This year, the Canadian dollar was unexpectedly under pressure due to the coronavirus epidemic in China. This sharply reduced the demand for oil and led to a drop in prices below $50 per CL/WTI barrel. Safe assets have significantly strengthened. At the same time, the market is trying to remain optimistic. Macroeconomic statistics and technical analysis tools in January weren't effective, although macroeconomic reports are unlikely to change the situation dramatically for the CAD/JPY.
This week is a volatile for the CAD/JPY pair due to the publication of a number of important macroeconomic reports in Canada: the trade balance in December and unemployment data in January. Investors will closely follow the situation in the Canadian economy, taking into account the growth of risks, as well as the softening of the Bank of Canada's rhetoric regarding monetary policy in the future.
We believe that in the long term, even if the coronavirus epidemic ends, we will still see negative consequences in the global economy, and directly for the Chinese economy, which will have a negative impact on oil consumption and investor sentiment. Therefore, the Canadian dollar will remain under pressure, although it is possible that today's data on the trade balance for December will support the CAD.
Most technical analysis tools tend to the deals to SELL in the long run, so these deals can be recommended, but with a willingness to the drawdown. In the short term, the deals to BUY can also be profitable if unemployment data matches the forecasts. The market entry points can also be considered at the levels of 84.567 and 79.055, although their achievement in the foreseeable future seems unlikely. In the future we expect that the rates will remain in the flat range.
