The CADJPY exchange rate can see a further advance from the recent surge in oil prices.
CADJPY – Daily Chart
The price of the CADJPY was higher yesterday after the OPEC oil-producing group agreed to a 1.2 million barrels per day freeze. The price of CADJPY trades at 100.87 but may move higher due to OPEC production changes.
The Canadian dollar versus the Japanese yen has long been used by currency traders as a proxy for oil trading. Japan imports almost all of its oil and is at the mercy of market prices. At the same time, Canada benefits from strong domestic reserves.
Yesterday’s move by OPEC surprised markets and led to a 6% rise in the price of crude oil. Oil prices had their worst first quarter since 2020, but markets are now expecting a further price advance, and there are fears that inflation could resurface.
CADJPY Forecast
On the exchange rate side, Japan’s central bank has shown no desire to raise interest rates, while Canada has recently paused due to a drop in its own prices. That could see the near-term trend in the CADJPY going higher, and the target is the 100.87 level which proved to be resistance in February.
“With the OPEC oil price increase and the expected rising demand coming from China, we could see oil prices go beyond our forecast of $88,” Albert Park of the Asian Development Bank told CNBC.
“That would put pressure on the region because higher oil, obviously, increases costs of production. They increase inflationary pressures as well.”
This puts “a lot of pressure” on regional governments to make “some tough decisions about trying to control inflation and support economic recovery,” he added.
Traders can look for the CADJPY to continue higher to the first resistance level with an initial move of around 100 pips.
