CAD/JPY - Canadian dollar to Japanese yen

After a strong bull market that lasted from November 2016 (following Trump's victory) to January 2017, CAD/JPY reversed for many months until June. Since then, the exchange rate has strengthened thanks to underlying strength in the Canadian dollar. The loonie has been supported in the latter half of 2017 by strong economic growth and interest rate hikes. 

Short term outlook
Bearish
Medium term outlook
Bearish

Canadian dollar daily update

The Canadian dollar is weakening today, as the global stock market rebound runs out of steam. In general, riskier assets such as stocks and commodities are doing poorly today, which is driving down the Canadian dollar. CAD is currently selling off against safe haven currencies such as the US dollar and the Japanese yen. The loonie is flat against the euro and the British pound. The US dollar is strengthening today, alongside most global government bonds. Safe haven assets such as the US dollar and government bonds typically rally when risk sentiment is weak. Turning to NAFTA discussions, top US and Mexican officials are cautiously optimistic that NAFTA can be renegotiated. The seventh round of negotiations will take place in Mexico City starting on February 25. As Mexican presidential elections are set to take place in July, there is a likelihood that talks will have to be postponed until later this year. Our short-term outlook on the Canadian dollar is neutral, while our medium-term outlook remains bullish.       

The USD/CAD exchange rate is currently above 1.2540. The euro is flat against the Canadian dollar, with EUR/CAD currently above 1.5590. The pound is also flat against the Canadian dollar, with GBP/CAD trading above 1.7570.

This is a very light week for economic data from Canada. Manufacturing sales figures missed expectations by a significant degree (-0.3% vs. 0.2% expected). Last week, trade balances and changes in employment were below expectations. 

Updated 

Japanese yen daily update

The Japanese yen continues to strengthen today, particularly against the US dollar. As a safe haven currency, the yen tends to weaken when global growth is accelerating and strengthens during downturns. While the yen began rising following fears of an extended stock market rout, the currency continues to strengthen despite a rebound in most global stock markets. Looking at Japanese domestic data, weak quarterly GDP growth figures and falling machinery exports helped yen strength this week. Turning to monetary policy, the current Bank of Japan Governor Haruhiko Kuroda was appointed for a rare second term, despite his age (73). Kuroda was appointed alongside deputies including BoJ executive director Masayoshi Amamiya and Waseda University professor Masazumi Wakatabe. Both are well-known for their pro-monetary easing views. Unfortunately for the yen, this isn't enough to change the course of the currency as it continues to strengthen. Our short-term and medium-term outlook on the yen remains bullish.    

USD/JPY is currently trading above 105.80. EUR/JPY is currently flat and trading above 132.70.

Looking at Japanese economic data, traders will be focused on upcoming GDP figures. Annualized QoQ GDP growth numbers (0.5% vs. 0.9% expected) widely missed estimates. Machinery orders (-5% vs. 2.2% expected) missed expectations by a very wide margin due to falling exports. Industrial output (2.9% vs. 0.5% prior) was higher than previous figures. Cross-border stock (-¥429.5b) and bond (-¥973.2b) investments continue to suggest capital inflows into the country. Last week, cross-border figures also showed that capital was flowing into Japan (strengthening the yen). 

Updated 

Canadian dollar to Japanese yen Outlook

Short term outlook
Bearish

As the pair weakens, we are now bearish on CAD/JPY. Looking at technical conditions, CAD/JPY is now looking oversold. This is based on various indicators looking at a daily chart of the pair. 

Medium term outlook
Bearish

As the pair weakens, we are now bearish on CAD/JPY in the medium-term. Note that the pair is trading within normal conditions. This is based on technical indicators looking at a weekly chart of the pair. 

Updated 

Canadian dollar analysis

Canadian dollar forecast: in vogue following better data in COT report

When will the Canadian dollar rebound? We take a closer look at the Canadian dollar future forecast and what the latest Commitments of Traders report says about the currency. Bank of Canada remains cautious - impacting trader optimism, but better data has us rethinking an earlier prediction.

Published 

BoC preview: binary odds

Expectations for today’s Bank of Canada rate decision are low – consensus expects rates to be maintained at 1%. Thus the real driver for the currency will be in the Bank’s statement. Last October, the BoC said that the “Governing Council will be cautious in making future adjustments in the policy rate”. Markets focused on the word “cautious”, believing that the outlook for further hikes in 2017 w…

Published 

CAD forecast: the coming economic downturn in Canada

CAD forecast: forex investors have reason to be cautious about the Canadian dollar. Changes in crude oil and real estate prices indicate a coming reversal of fortune.

Published 

Japanese yen analysis

EUR/JPY: An “easy” long idea gets trickier

In early 2017, doubts regarding the integrity of the Eurozone led many to take refuge in the Japanese yen. Unlike the euro, the Japanese yen exhibits classic safe haven characteristics and tends to strengthen during downturns. Following the Brexit referendum vote and US presidential elections, few were willing to bet on opinion polls that predicted Macron’s victory. Similar to political events in…

Published 

Japanese yen: Bank of Japan versus interest rates

Japan has suffered from weak growth and inflation since the global financial crisis, and the Bank of Japan has frequently experimented with unorthodox monetary policies. In September 2016, the BoJ decided to directly target long-term interest rates. The so-called “yield curve control” (YCC) program fixed 10-year Japanese government bond (JGB) yields at 0%. If yields deviated from the BoJ’s target…

Published 
Tags: Japanese yen

BoJ preview: reversal rates and natural yield curves

As the Bank of Japan is one of the world’s most dovish central banks, market expectations for this week’s upcoming event are very limited. Governor Haruhiko Kuroda, who has overseen a $4T quantitative easing program and negative interest rates over his 5-year term at the Bank, is an unlikely candidate to bring about hawkish monetary policies. This is especially the case as domestic inflation rema…

Published 
Tags: Japanese yen

Economic calendar

Economic Calendar by TradingView