MG Network

something big isHappening!

In the mean time you can connect with us with via:

Copyright © Money Grows Network | Theme By Gooyaabi Templates

Money Grows Network

Archive

Powered by Blogger.

Welcome To Money Grows Network

Verified By

2006 - 2019 © www.moneygrows.net

Investments in financial products are subject to market risk. Some financial products, such as currency exchange, are highly speculative and any investment should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only.

Popular

Pages

Expert In

Name*


Message*

CFTC report was outdated before it was released, CAD will try to develop a correction, and the demand for JPY is unlikely

Asia-Pacific exchanges opened higher on Monday after a large-scale decline last week. The leader is the Shanghai Composite, which won 3.43% as of 6.30 Universal time. On the other hand, Nikkei225 looks more modest, rising 0.98%, while indices in countries oriented towards exporting raw materials continue to decline - DJ New Zealand is down 0.99%, and the Australian S & P / ASX 200 is down 0.77%.

In turn, the simultaneous growth of oil and gold indicates a growing weakness of the dollar rather than a reversal of trends. There is no reason to expect that the panic has ended.

USD/CAD

The key event of the week for the Canadian dollar will be the meeting of the Bank of Canada on Wednesday and on Thursday, the head of BoC Poloz will make a report on the current state of the economy.

The Bank of Canada is expected to lower the discount rate. However, there are too many events that are not directly related to internal conditions that affect the future decision. Oil prices lost almost 30% in just over a month, which is a serious blow to Canada's economic outlook, as well as a massive drop in the stock market. Domestic demand is declining, GDP growth in the last 2 quarters is weak, and there is also a virus - as a whole, there is a risk of seeing a drop in GDP already in the 1st quarter.

While inflation looks confident, the target of 2% has been reached in January. However, according to a number of indirect signs, there is clearly a risk of seeing a slowdown in this parameter already in the coming month.

The CFTC report for the Canadian currency turned out to be neutral positive. The net long position rose to $ 1.1 billion, but here, we must assume that the main sale in the markets occurred at the end of the week, and these data will be reflected only in the next report. Moreover, the USD/CAD rate has grown significantly relative to the estimated fair price; therefore, we can expect a corrective decrease in the loonie in the coming days.

analytics5e5ca99d27106.jpg

Support zone is at 1.3320 / 30. We can expect that there is a serious probability of breaking through this zone taking into account the fact that the estimated price is also directed downwards. This can happen if BoC on Wednesday and Poloz next day emphasize the temporary nature of the negative trend, and the Bank limits itself to lowering the rate and does not inform the markets of its readiness to expand incentive measures.

This scenario would be logical if it were not for the panic associated with the coronavirus. It could provoke another wave of large-scale sales, which will push USD/CAD up regardless of what guidance BoC investors will give.

USD/JPY

The sharp increase in demand for the yen last week is the result of the collapse of markets and flight into defensive assets. The CFTC report did not show any signs that investors were preparing to buy the yen - the net short increased by the end of the week, that is, speculators still adhered to a negative forecast for the yen, even though the threat of a global recession grew, and the spread of COVID-19 accelerated.

The fair price is in the range 110 - 110.50, so the probability of USD/JPY returning to the zone of the highs reached before is still high. However, the estimated price has turned down and is below its average, which indicates a trend reversal.

analytics5e5ca9b4e068e.jpg

An additional factor that led to increased demand for the yen was the publication on Friday of a number of macroeconomic indicators, which turned out to be generally worse than expected. In February, inflation in the Tokyo area declined to 0.4% y / y, which is already almost deflation. The unemployment rate unexpectedly increased from 2.2% to 2.4%, activity in the construction sector sharply decreased - the volume of orders in January declined by 17%, and the construction started on 10.1%.

Mizuho Bank, analyzing the pace of distribution of COVID-19, wonders which country, next to Italy and South Korea, will be next. If the epidemic gets out of control, neither a reduction in rates nor a quantitative easing will help, and such a scenario will directly contribute to a further increase in demand for the yen.

Nevertheless, the bearish momentum of USD/JPY remains strong. A pullback to the resistance level of 108.29 may provoke a new wave of sales if it is not possible to rise higher the next day.

The material has been provided by InstaForex Company - www.instaforex.com