Cad/Jpy ready to fall? | Forex Factory

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Cad/Jpy ready to fall?

  • #1
  • First Post: Jan 17, 2007 11:01am Jan 17, 2007 11:01am
Not sure if this is the correct forum to post this in, but does anybody else think that Cad/Jpy is ready to fall in the short term due to the sell-off of oil? It seems to me that oil acts as a leading indicator for Cad/Jpy, and that Cad/Jpy has yet to correct to match oil prices. Anybody else have any opinions?
PipMasterFlex
  • #2
  • Jan 17, 2007 3:25pm Jan 17, 2007 3:25pm
It does seem that there is a high degree of negative correlation but I think that might be the opposite of what you are suggesting. When crude drops the CADJPY seems to actually go up. Perhaps this means that Japan is more sensitive the changes in oil than Canada might be.
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  • #3
  • Jan 17, 2007 4:12pm Jan 17, 2007 4:12pm
Well, that's an interesting comparison. Let's see..... Canada being a net exporter of oil you would expect the currency to be affected somewhat. However it looks like there may be a 2-month lag on the oil price pushing CadJpy in any direction.

Also with Japan buying all it's oil you would think that falling oil prices would strengthen the Yen, and maybe they do. Is this lag due to the time difference between the contract oil price and the point at which payment actually becomes due?

For consideration, imho, if the Jpy rate rises at the next announcement we shall see a fall in CadJpy. Look for penetration of 102.40 giving strength to any downward move. If the Jpy rate does not change then I see the pair going mainly sideways until something else provokes a shift.

Not a recommendation, just an observation.
Minesweeper target: 284
  • #4
  • Jan 17, 2007 6:54pm Jan 17, 2007 6:54pm
Mcgrew i think your attachment might be a bit too short time frame to show the correlation?? It looks like a negative correalation but i think what it is just too little of a time frame to see the lagging movement. It takes it is at least 2 months behind the actual oil price movement from what it looks like. hopefully BOJ doesn't raise their rates, i am holding this in a carry trade along with a lot a lot of other people. I sold off a little bit though after oil tumbled to almost $50, waiting for a possibility of correction.
PipMasterFlex
  • #5
  • Jan 17, 2007 7:29pm Jan 17, 2007 7:29pm
Sorry to disappoint you. Perhaps you could post something more relevant to show the relationship that you speak of.

The fact that you are in a carry trade with others has little relavance as to how the market behaves to changes in crude prices.
  • #6
  • Jan 18, 2007 7:20pm Jan 18, 2007 7:20pm
Quoting isufreak24
Mcgrew i think your attachment might be a bit too short time frame to show the correlation?? It looks like a negative correalation but i think what it is just too little of a time frame to see the lagging movement. It takes it is at least 2 months behind the actual oil price movement from what it looks like. hopefully BOJ doesn't raise their rates, i am holding this in a carry trade along with a lot a lot of other people. I sold off a little bit though after oil tumbled to almost $50, waiting for a possibility of correction.
Well I guess you must be pretty happy for the moment at least.
Not only did BoJ leave their interest rate on hold but CadJpy went happily upward.
Minesweeper target: 284
  • #7
  • Jan 19, 2007 11:14pm Jan 19, 2007 11:14pm
Quoting philmcgrew
Sorry to disappoint you. Perhaps you could post something more relevant to show the relationship that you speak of.

The fact that you are in a carry trade with others has little relavance as to how the market behaves to changes in crude prices.
Mcgrew, you didn't disapoint me, i having been looking at a chart of about 3 years of the correlation. I am pretty confident of the correation, but was just wondering about other's opinions,and if anything else could move the price short term, such as the BOJ's decision. Yes, Primate I am glad of their decision!!!! i will try to attach long term graph of crude vs. cad/jpy.
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PipMasterFlex
  • #8
  • Jan 19, 2007 11:18pm Jan 19, 2007 11:18pm
Quoting philmcgrew

The fact that you are in a carry trade with others has little relavance as to how the market behaves to changes in crude prices.
I didn't mean for it to sound like i thought it did have relevance, i was just stating why I am holding it and why i didn't want to be caught in a strong downtrend after oil has sold off big time.
PipMasterFlex
  • #9
  • Jan 20, 2007 8:05am Jan 20, 2007 8:05am
Quoting isufreak24
Mcgrew, you didn't disapoint me, i having been looking at a chart of about 3 years of the correlation. I am pretty confident of the correation, but was just wondering about other's opinions,and if anything else could move the price short term, such as the BOJ's decision. Yes, Primate I am glad of their decision!!!! i will try to attach long term graph of crude vs. cad/jpy.
freak, with all due respect, I don't think your chart makes your point. It is no secret that in recent years the price of crude has doubled. It is also no secret that they value of the yen has plummeted. You could have put up a chart of USDJPY, AUDJPY, CHFJPY, GBPJPY, NZDJPY, or anything else vs. the JPY, made the same graph and drawn the same conclusions. All of those pairs have gone straight up. By positng a chart of two currency pairs against oil you have not isolated the source of your correlation.
  • #10
  • Jan 20, 2007 1:41pm Jan 20, 2007 1:41pm
mcgrew you make a good point. it is worth noting that all of those pairs you mentioned have gone up during the same time period as the graph i attached. Do you think a reason why JPY has been weak could be the subject we are discussing? oil prices have gone up ALOT over the past 3-5 years so it could be a reason why jpy has weakened?? if jpy was really weak, then all of those pairs you mentioned would go up. it's just the whole thing about CAD and all the oil they export why the pair is supposedly the best one to play oil prices.
PipMasterFlex
  • #11
  • Jan 22, 2007 1:27pm Jan 22, 2007 1:27pm
Well it looks like TODAY is the day of the fall; but I'll be hanged if I can see why
Minesweeper target: 284
  • #12
  • Jan 22, 2007 1:44pm Jan 22, 2007 1:44pm
Crude oil is down a buck, the USDCAD is up 100 pips and the USDCHF hasn't moved which loosely means the USDCAD moved on CAD weakness and not USD strength. You'll drive yourself nuts trying to figure out why all of this happens...don't hang yourself.
  • #13
  • Jan 22, 2007 3:34pm Jan 22, 2007 3:34pm
Didn't hang myself, got in long @ 102.90. It is gently curling up.
Shall see if I caught the knife or if I'm about to lose my fingers.
Minesweeper target: 284
  • #14
  • Jan 22, 2007 4:06pm Jan 22, 2007 4:06pm
According to the blah... on Yahoo today is the last day of the February contract negotiations, so any sudden movements will be due to people having to cover their positions (oil that is). Also the barrel price went below $50 last week so I suspect all will be well again tomorrow when the current cold spell afflicting the US and recently western Europe (well the UK at any rate) starts to bite.
Minesweeper target: 284
  • #15
  • Jan 22, 2007 4:20pm Jan 22, 2007 4:20pm
Your thinking way too much about this. Just trade what you see.

Here is an article written by some genius this morning when crude opened up. After he posted the article crdue dropped and closed down for the day. People get paid to make up excuses why things happened. Don't listen to them. When I traded professionally we would get a call from Reuters every day to see what we knew about the market. We would make up some BS story because we didn't want to give away what we knew but by giving him something he would tell us what he thought he knew (which, in turn was lies from other brokers). Stay above all this stuff.
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  • #16
  • Jan 22, 2007 4:41pm Jan 22, 2007 4:41pm
Quoting philmcgrew
Your thinking way too much about this. Just trade what you see.
I only went looking 'cos you mentioned it.....
CADJPY I'm out again for a couple of beers.
Minesweeper target: 284
  • #17
  • Jan 22, 2007 6:05pm Jan 22, 2007 6:05pm
I believe the problem here is a confusion between correlation and causation:

Eggs cost $2
Tiki Huts cost $100

Eggs go up to $4
Tiki Huts go down to $70

Tiki Huts price caused Eggs price to go up?

Not in my opinion. Just looks like a coincidence
  • #18
  • Last Post: Jan 22, 2007 7:34pm Jan 22, 2007 7:34pm
Quoting philmcgrew
Your thinking way too much about this. Just trade what you see.

Here is an article written by some genius this morning when crude opened up. After he posted the article crdue dropped and closed down for the day. People get paid to make up excuses why things happened. Don't listen to them. When I traded professionally we would get a call from Reuters every day to see what we knew about the market. We would make up some BS story because we didn't want to give away what we knew but by giving him something he would tell us what he thought he knew (which, in turn was lies from other brokers). Stay above all this stuff.
that's pretty good mcgrew. You worked for Rueters? Cool.
BTW, I read that same article this morning, while my other high school classmates check their myspaces and play internet games, i'm reading market reports and checking up on my stocks. thats what i love about this forum. I'm pretty sure no other senior in my school has a clue about forex.
PipMasterFlex
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