As we all know, the CAD/JPY was rising and rising for the past few weeks. Recently, there was a retracement, hitting a low of 87.26. Now, the question is with Oil prices potentially increasing over 2010, what’s the prospect of CAD/JPY continuing on the long path? Very likely. In fact, I would go as far to say CAD/JPY is going to go up for most of 2010.
Now, I know many people will say, “but shorting the USD/CAD” is the traditional way of trading oil in Forex.
Just to quickly explain why this is the case. As you know, Canada is an oil exporter, and the US is an oil importer. So when oil starts to increase in price, this is reflected in USD/CAD where it heads south.
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So yeah of course, shorting the USD/CAD is one option, but the problem that I’ve found with USD/CAD is that the USD is VERY fickle. You have to remember that MAJORITY of the world’s trades involve the USD, hence you’re gonna get lots of fluctuations on a variety of news reports. Just take a look at the Forex Factory Calendar on any given day, and you’ll see what I mean. Scary shit.
My point is, the USD/CAD can react to virtually anything, even to news reports that don’t really appear to be that big of a deal. I have noticed this more and more, and it’s becoming kind of annoying. Nowadays, when we trade the dollar, we have to be concerned about “relatively” small news which can give some nasty surprises.
So usually, if oil is gonna rise this year, then people will wanna sell USD/CAD. However, the reason why I think CAD/JPY is a good pair to trade in terms of oil, is because again, Canada is an exporter of oil, and Japan is an importer of oil, and this is reflected in CAD/JPY where it heads north, and you avoid all the “heartattacks” that the USD brings. I personally think you’re much better off buying the CAD/JPY in this scenario, as a safer long-term investment for 2010.