By: DailyForex.com
The CAD/JPY pair fell hard during the session on Friday, as we continue the consolidation that this pair has shown over the course of the last couple of months. The top of this area seems to be roughly around the 81 handle, while the bottom is roughly around the 79 or so.
This is one of my favorite pairs to play one the oil markets are moving in a clear trend. This is because the Japanese import 100% of their petroleum, while Canada is an exporter of it. With this in mind, when oil goes up, this pair typically does as well.
The oil markets have been extremely volatile lately, and as such it has had a volatile yet consolidated of affect on this market. This makes sense, as we have been stuck in a bit of a range with the choppiness in that market can currently.
Oil Will Lead the Way
I found that the oil market normally leads the currency pair. Because of this, if you are a day trader’s this could be a very good market to be involved with. Simply watch the oil markets, and hopefully things should work out in the same direction. Granted, the relationship isn't always 100%, but it's about as close to it as you'll see in the Forex markets. It certainly stronger than the relationship between gold in the Australian dollar, and as such it is one of my favorite plays.
If we can get above the 81 handle, I wouldn't hesitate to buy-and-hold this pair as it not only should have a strong showing over time, it also has a positive swap. This rather normally quite reasonable, as I only pay about three pips on average, it is certainly moves just as smooth as any other Forex pair.
However, we managed to break down below the 79 level it will more than likely mean a run back to the 76 handle. This will probably coincide with a fall in oil prices as well, which seem to be fairly well supported at the 80 handle. It should be noted, that when I speak of oil and this currency pair I am speaking of the light sweet crude contract, of which Canada tends to export more of.