Initially, I was bearish about this pair due to the following reasons:
Lockdowns
It's clear that countries will not enact lockdowns like back in early 2020. They have opted for localised shutdowns which will ensure their economies are still running. However, it's still early to judge the spread of the virus and specific country policies might change. For example, bars in Paris will remain closed from Tuesday this week and Boris Johnson took responsibility for the rise in cases as a result of bar openings in the UK. This shows that the situation can change rapidly.
Therefore, I will have a slightly bullish Sentiment on this pair. The CFTC COT Weekly report shows that CAD net positions remain negative at - 19.6k while close to 10k long positions were closed on the JPY.
The pair might run into a range as the confluence of factors to suggest either pair will be strong is absent.
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Lockdowns
- With a surging second wave of covid19 cases around the world, I was expecting lockdowns in major cities. This would affect supply chains and oil demand directly. Since Canada is a net exporter or oil, demand for the CAD would be lower with movement restrictions.
- Following lockdowns, the equity markets would be volatile and investors would ha parked their money in safe haven Currencies including the YEN.
It's clear that countries will not enact lockdowns like back in early 2020. They have opted for localised shutdowns which will ensure their economies are still running. However, it's still early to judge the spread of the virus and specific country policies might change. For example, bars in Paris will remain closed from Tuesday this week and Boris Johnson took responsibility for the rise in cases as a result of bar openings in the UK. This shows that the situation can change rapidly.
Therefore, I will have a slightly bullish Sentiment on this pair. The CFTC COT Weekly report shows that CAD net positions remain negative at - 19.6k while close to 10k long positions were closed on the JPY.
The pair might run into a range as the confluence of factors to suggest either pair will be strong is absent.
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