This currency pair is characterized by incredible stability in the conditions of uncertainty and panic that prevail on the market, under the influence of the coronavirus and the most heavy economic downturn since the Great Depression. A flat trend is a rare thing this year, but nevertheless we have seen one for more than a month with the CAD/JPY quotes, and it has no signs of ending. On the contrary, since April we have observed a narrowing of the range.
How does a commodity currency successfully resist a safe asset when commodity prices, especially oil, tend to zero and when safe assets are well supported? The reason for this is the weakness of the Japanese economy, which motivates investors to look for other safe assets. In the current environment, the USD has become another safe asset, as has Gold, while the JPY and the CHF receive less support.
The past week has been saturated for both currencies. As it became known, the trade surplus in Japan in March sharply decreased due to a fall in exports by 11.7%, which is 10 times less than in February. Thus, the trade balance was 4.9 billion JPY against 1108.8 billion JPY in February. Against this background, macroeconomic reports from Canada and zero inflation figures seemed more than decent. Therefore, despite the enormous pressure due to the collapse in oil prices, the strengthening of the Canadian dollar against the yen did not stop.
Next week, we expect a decrease in volatility due to the upcoming holidays in May. At the same time, we believe that the publication of reports on business activity in China will remind investors that not everything is hopeless for the global economy, so commodity currencies should be supported. Oil value has also been below zero. so the CAD has already experienced the maximum pressure from the oil market. Therefore, the deals to Buy in favor of the CAD can be considered more promising, taking into account that most technical analysis tools indicate the efficiency of the deals to Buy within the current flat trend. Entry points are noted at the levels of 74,236 and 78,284 JPY, which could signal the end of the flat trend.
