If you like watching oil prices....
Dear Friends/Fellow Traders,
Most of us like following two major commodity prices, gold and oil. Gold is perceived to be a safe store of value in times of geopolitical uncertainties and Oil is, well, a daily necessity and a good proportion of headlines and articles on publications focus on oil(some have nicknamed Oil as 'Black Gold'). Getting back to my point, if you like watching oil prices, then there is one currency pair that you MUST keep your eye on; this currency pair is the CAD/JPY (Canadian Dollar/Japanese Yen), and let me explain why. The CAD/JPY pair has a correlation of greater than 85% with the price of oil, because Canada is one of the global supply leaders of oil and is one of the greatest beneficiaries. On the flip side of the coin, Japan is one of the biggest victims since they import nearly 100% of their oil. When oil prices move up, there will be upside pressure on the Canadian Dollar (the CAD will tend to appreciate) and downside pressure on the Japanese Yen (the JPY will tend to depreciate). Conversely, when oil prices move down, Canadian companies will no longer receive staggering revenues and Japanese companies will no longer be faced with astronomical input costs. I may be exaggerating a little with my choice of words, but I'm sure you all get the idea. From my experience there is always a minor lag from when oil prices move to when the CAD/JPY pairing moves, but this correlation has almost always held true for me in the past. I hope that you can all benefit from this neat little observation.
Stay tuned for more updates!
To successful trading,
Dickens
Most of us like following two major commodity prices, gold and oil. Gold is perceived to be a safe store of value in times of geopolitical uncertainties and Oil is, well, a daily necessity and a good proportion of headlines and articles on publications focus on oil(some have nicknamed Oil as 'Black Gold'). Getting back to my point, if you like watching oil prices, then there is one currency pair that you MUST keep your eye on; this currency pair is the CAD/JPY (Canadian Dollar/Japanese Yen), and let me explain why. The CAD/JPY pair has a correlation of greater than 85% with the price of oil, because Canada is one of the global supply leaders of oil and is one of the greatest beneficiaries. On the flip side of the coin, Japan is one of the biggest victims since they import nearly 100% of their oil. When oil prices move up, there will be upside pressure on the Canadian Dollar (the CAD will tend to appreciate) and downside pressure on the Japanese Yen (the JPY will tend to depreciate). Conversely, when oil prices move down, Canadian companies will no longer receive staggering revenues and Japanese companies will no longer be faced with astronomical input costs. I may be exaggerating a little with my choice of words, but I'm sure you all get the idea. From my experience there is always a minor lag from when oil prices move to when the CAD/JPY pairing moves, but this correlation has almost always held true for me in the past. I hope that you can all benefit from this neat little observation.
Stay tuned for more updates!
To successful trading,
Dickens
posted by ForexDragon at 3:17 PM
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