Bias: The CAD/JPY pair is bullish-to-range-bound, trading above its 90-day average and within the upper half of the recent range.
Key drivers:
• Rate gap: The Bank of Canada recently lowered rates while the Bank of Japan is tightening policy, making the CAD less attractive relative to the JPY.
• Risk/commodities: Oil prices are currently above their average, which supports the CAD, as Canada benefits from higher oil revenues being a top exporter.
• Macro factor: The recent rise in Canadian unemployment adds uncertainty, which could weigh on the CAD's performance in the near term.
Range: The CAD/JPY pair is likely to hold within its recent range, but may test the upper end if oil prices continue to climb.
What could change it:
• Upside risk: A stronger-than-expected rebound in Canadian employment data could boost the CAD.
• Downside risk: Persistent pressure from U.S. tariffs on Canadian goods could further weaken the CAD.