CAD/JPY Outlook:
The CAD/JPY pair is likely to move sideways as it is trading near its recent average and lacks a clear driver pushing it up or down. The current market conditions suggest limited volatility in this currency pair.
Key drivers:
• Rate gap: The Bank of Canada has maintained a cautious stance with lower interest rates compared to the Bank of Japan's recent hikes, which supports a stronger yen.
• Risk/commodities: Rising oil prices, currently at near 90-day highs, bolster the Canadian dollar due to increased revenue from exports.
• One macro factor: Consumer spending in Canada is showing potential for improvement, which could benefit the CAD if upcoming data reflects this.
Range:
Expect CAD/JPY to remain stable, likely drifting within its recent 3-month range without significant breakouts.
What could change it:
• Upside risk: A substantial increase in Canadian retail sales could strengthen the CAD.
• Downside risk: Renewed trade tensions with the U.S. may weaken the CAD further.