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TL;DR: Brent’s break above $90 is doing double duty for CAD/JPY — strengthening Canada’s terms of trade while pushing global bond yields higher and deepening Yen funding pressure — and this time Canada’s own data are contributing too, unlike June’s Yen-only rally.

CAD/JPY Has Found a Rare Double Tailwind Brent’s break above $90 is doing more than lifting Canadian Dollar. It is also pushing global inflation expectations and bond yields higher, adding pressure to Yen. For CAD/JPY, that creates an unusually clean setup: same US-Iran shock strengthens one side of cross while weakening other.

June 17 ceasefire framework formally expired on August 17 without renewal, leaving no clear diplomatic settlement in sight. Higher oil improves Canada’s terms of trade and supports petro-currency, while renewed energy and freight inflation keeps global yields elevated. For Yen, still one of market’s principal funding currencies, wider yield differentials reinforce carry pressure. Instead of two separate narratives, CAD strength and JPY weakness are being driven by same underlying shock.

This Time Canada Is Contributing Too That is important because CAD/JPY has rallied on Yen weakness before. Late-June advance eventually stalled because Canadian Dollar itself offered limited independent support. Current move starts from a stronger domestic backdrop.

May GDP rose 0.3% m/m, beating 0.2% forecast and expanding across 13 of 20 sectors. July labor data then surprised decisively, with employment jumping 75K against 15K expected and unemployment dropping to a two-year low of 6.4%. July CPI followed with headline inflation accelerating from 2.8% to 3.0% y/y, above 2.9% consensus, while Trimmed and Median CPI firmed to 1.9% and 2.0% respectively.

Gasoline was a substantial part of headline inflation surge, rising 25.7% y/y, and part of that effect is linked to tax treatment that rolls off in September. That argues against treating CPI as proof that BoC has already returned to a tightening path. But combined with stronger growth and employment, data have at least reopened hike discussion after it had largely disappeared. For CAD, that is enough to distinguish current rally from June’s mostly Yen-driven move.

Oil Shock Is Also Hurting Yen Through Bonds Global bond market supplies second leg. US 30-year yield has climbed to around 5.31%, highest in 19 years, while 10-year is near 4.74%. Germany’s 10-year Bund has reached about 3.22%, highest since 2011, and Canada’s 10-year recently touched 3.75%, a 26-month high.

Current rise in yields carries a stagflationary flavor rather than a straightforward growth signal. Hormuz disruptions and higher energy and freight costs are lifting inflation concerns and encouraging investors to price restrictive rates for longer. That is exactly environment in which Yen’s yield disadvantage becomes harder to ignore.

BoJ normalization may eventually narrow that gap, but global yields are moving higher in meantime. Until Japanese rates catch up more substantially, higher overseas yields continue to reinforce Yen-funded carry trades. Brent above $90 therefore creates a double effect for CAD/JPY: stronger Canadian terms of trade and greater funding pressure on Yen.

Brent Consolidation Will Tell Us Whether CAD Strength Is Real Best test of this rally may come when oil stops rising.

If Brent consolidates around $90–91 and CAD/JPY continues holding or extending gains, that would be strong evidence that Canadian Dollar’s domestic improvement is doing meaningful work. GDP, employment and CPI would then be providing enough support for CAD to carry rally even without another daily oil breakout.

If CAD/JPY instead stalls immediately whenever crude stops climbing, move would look more like June again: predominantly Yen weakness with limited independent CAD follow-through.

That gives current trade a falsifiable fundamental test. A durable move toward 120 should increasingly survive without requiring Brent to make new highs every session.

Japan Can Still Interrupt the Trade Main risk does not currently come from Canada. It comes from Japan.

USD/JPY is moving back toward 160 intervention-sensitive zone, reviving possibility of verbal or direct action from Japanese authorities. September 18 BoJ meeting also approaches with substantial probability of another rate increase already priced.

Either development could hit CAD/JPY even if oil remains high. Actual intervention would likely trigger broad Yen buying across crosses, while a BoJ hike would challenge carry mechanism more fundamentally.

That makes 120 a plausible target, but not a low-volatility one. Stronger oil and global yields are pushing Yen in exactly direction that increases likelihood of Japanese response.

ActionForex’s Technical View on CAD/JPY: Break of 117.50 Would Put 120.86 on Map Technical structure supports bullish case. CAD/JPY has decisively reclaimed 55-day EMA around 114.52, adding to argument that correction from 117.50 ended at 110.82 in a three-wave structure. That low held around 111.28, 38.2% retracement of larger rise from 101.24 to 117.50, preserving medium-term uptrend.

Near-term bias stays higher while 113.86 holds. 116.45 is first resistance and a firm break would strengthen case that rebound has enough momentum to retest 117.50. Decisive break of 117.50 would be more important, signaling likely resumption of broader uptrend and opening 120 psychological level, followed by 120.86, 61.8% projection of 101.24 to 117.50 from 110.82.

Break below 113.86 would postpone that bullish scenario and suggest correction from 117.50 is extending. But while oil stays elevated, Canadian data remain firm and global yields keep Yen under pressure, CAD/JPY has a stronger foundation than during June’s failed advance. This time, both sides of cross are helping.

Key Takeaways Brent’s break above $90 is strengthening CAD/JPY from both sides: improving Canada’s terms of trade while pushing global yields higher and pressuring the Yen’s carry-funding role. Unlike June’s Yen-only rally, Canada’s own data are now contributing, with a 75K jobs beat, firmer May GDP, and CPI reopening the BoC hike discussion. Global bond yields are rising with a stagflationary character, with the US 30-year at a 19-year high and German and Canadian yields at multi-year highs. Brent stabilizing around $90-91 is a falsifiable test: continued CAD/JPY strength without new oil highs would confirm the domestic Canadian story is real. 117.50 is the key resistance for a run toward 120 and then 120.86, but USD/JPY nearing the 159.6-160.6 intervention zone and the September 18 BoJ meeting remain the main risks to that path.

ActionForex

ActionForex.com was set up back in 2004 with the aim to provide insightful analysis to forex traders, serving the trading community for two decades. We started providing only a daily and a mid-day report, now known as Action Insights. Gradually, we added a lot more in-house contents to the site. Technical Outlook section was expanded to cover more pairs. In addition to that, Top Movers, Heat Map, Pivot Point Charts and Pivot Meters, Action Bias and Volatility Charts, are tools used by traders from all over the world.

In today’s blog post, we take a trip down memory lane and look back at a previous CADJPY analysis. This serves as a great example of how we use technical analysis to identify potential market moves.

Specifically, we’ll be examining the CADJPY chart from 07.29.2026. At that time, we were tracking a potential bullish move. Our Elliott Wave analysis suggested that a primary wave (B) corrective pattern was nearing completion.

According to our forecast, we anticipated that CADJPY would form a significant high somewhere in the 117.52 region. This level represented a major Fibonacci resistance zone, and we believed it would be a logical place for the bulls to take profits and for the bears to re-enter the market.

The reaction: Sharp reversal from the highs

As anticipated, CADJPY capped its upward momentum right at the projected peak area and reversed aggressively to the downside. The pair completed wave ((v)) of C of (B) just below the 116.49 invalidation level, confirming the top before launching into a sharp impulsive decline.

This sell‑off drove prices more than 500 pips lower, reaching the 110.50 zone to complete wave 1, now trading around 112.02. The initial drop unfolded in five clear sub‑waves, underscoring the strength of the move.

Looking ahead, with wave 1 complete, the forecast calls for a corrective three‑wave bounce in wave 2—((a)), ((b)), and ((c))—toward the 113.50–114.00 region. Once this corrective rally is complete, the higher‑degree downtrend is expected to resume, extending the bearish sequence. Importantly, selling directly into current lows is not advised, as a corrective bounce is anticipated before the next major decline unfolds.

ConclusionThe CADJPY sequence is a textbook example of how Elliott Wave analysis maps out corrective structures and anticipates reversals. By combining wave counts, invalidation levels, and right‑side tags, traders can position themselves with the trend rather than against it.

Why confirmed US-Japan intervention pushed Yen strength into the crosses instead of breaking USD/JPY below 155 What’s happening: Japan and the US jointly confirmed last week’s coordinated Yen-buying intervention, the first since 2011, and did so unusually fast, extending the Yen’s rally into Monday’s session. Yet USD/JPY stalled just above the key 155 support level as buyers emerged, and Yen strength instead squeezed into the crosses, hitting AUD/JPY, NZD/JPY, GBP/JPY, CAD/JPY and CHF/JPY hardest. Why it matters: The pattern suggests traders don’t yet believe intervention was designed to force USD/JPY meaningfully below 155, just to prevent a rapid return above 160. Whether that adjustment mechanism, squeezing carry trades in the crosses, continues, or USD/JPY eventually breaks 155 outright, is one of the more important themes to watch this week.

Also today:

Oil gapped lower again to as low as $81.55 as the US cancelled planned strikes and Trump signaled talks with Iran, though Tehran says no direct negotiations are planned yet. A week of top-tier US data begins today with ISM Manufacturing, building toward Friday’s non-farm payrolls, which will shape the Fed’s flexibility heading into next week’s CPI report rather than settle September policy on its own. Confirmed Intervention Marks a Break From Japan’s Usual Playbook The week’s opening session was dominated by an unusually explicit display of currency cooperation between Washington and Tokyo. Both governments confirmed they had jointly intervened to support the Yen last week, marking the first coordinated operation since 2011. More striking than the intervention itself was the speed of the confirmation. Rather than adhering to Japan’s long-standing strategy of refusing to comment on intervention, officials on both sides moved quickly to acknowledge the operation, reinforcing the message that they stand ready to act again if necessary. The shift suggests policymakers are placing greater value on intervention credibility than on strategic ambiguity.

USD/JPY Stalls at 155 as Yen Strength Squeezes Into the Crosses That message initially extended last week’s Yen rally, pushing USD/JPY lower in early trading. Yet the decline stalled just ahead of the key 155 support area, where buyers emerged before the pair could test the level decisively. The price action is notable because it suggests traders remain reluctant to challenge what has become an important technical level. For now, the market still appears to believe the objective of last week’s intervention was to prevent another rapid return above 160 rather than engineer a sustained move below 155.

Instead of forcing USD/JPY through support, demand for the Japanese currency found another outlet. Yen strength was effectively squeezed into the crosses, with high-yielding currencies bearing the brunt of the adjustment. AUD/JPY led losses, followed by NZD/JPY, while GBP/JPY, CAD/JPY and CHF/JPY also declined sharply. The pattern points to a broader reduction in Yen-funded carry trades rather than outright Dollar weakness. Whether this remains the preferred adjustment mechanism, or whether USD/JPY eventually breaks below 155, will be one of the more interesting themes to watch in the days ahead.

Crosses Under Pressure AUD/JPY: led losses among Yen crosses NZD/JPY: second-sharpest decline GBP/JPY, CAD/JPY, CHF/JPY: also declined sharply

Oil Gaps Lower Again as Diplomatic Signals Conflict Oil markets also began the week with another sharp gap lower. Brent crude, which closed above $90 last week, briefly fell to as low as $81.55 before stabilizing around the $83 area. As in recent weeks, the move reflected hopes of easing tensions in the Middle East after the US cancelled planned military strikes over the weekend. President Donald Trump said negotiations with Iran would begin on Monday, again raising expectations of a diplomatic breakthrough.

Tehran, however, continued to offer a far more cautious assessment. Iranian Foreign Ministry spokesperson Esmail Baghaei said there were no immediate plans for direct negotiations with Washington, reiterating that discussions remain limited to Omani mediation over the Strait of Hormuz. The conflicting narratives have become a familiar feature of this crisis. Markets appear reluctant to react aggressively to political statements alone, preferring to wait for tangible evidence of changes in shipping conditions or energy flows before reassessing geopolitical risk.

A Week Packed With Top-Tier US Data Attention now shifts firmly to a week packed with top-tier US economic data. ISM Manufacturing kicks things off today, followed by ISM Services, ADP employment and Friday’s non-farm payrolls. Fed funds futures continue to price a little over a 60% probability of a September rate hike, indicating markets still lean toward further tightening but without strong conviction.

That makes this week’s data particularly important, not because they are likely to determine September policy on their own, but because they will shape how much flexibility the Federal Reserve has heading into next week’s CPI report. A strong run of data would reinforce confidence in the economy and leave policymakers well positioned to tighten again should inflation remain sticky. Conversely, softer readings would raise the bar for another hike.

This Week’s US Data Calendar Today: ISM Manufacturing This week: ISM Services, ADP employment Friday: Non-farm payrolls Fed funds futures: a little over 60% probability of a September hike Currency Performance Today For the day so far, Yen is currently the strongest, followed by Euro, and then Dollar. Aussie is the worst, followed by Kiwi, and the Swiss Franc. Sterling and Loonie are positioning in the middle.

Related Coverage Yen & Precious Metals Deep Dives Read the deeper dive into why Japan and the US broke decades of strategic ambiguity to confirm intervention this fast, and what holding above 155 would signal: Why Did Japan and the US Confirm Intervention So Fast? Can USD/JPY Hold 155?. See why Gold has stopped reacting to oil, yields and the Dollar, and what could finally break its trading range: Why Gold Ignores Oil, Yields and Dollar, and What Could Finally Break the Range. Global Manufacturing PMI Roundup Read why the UK’s softer PMI headline masks the fastest factory output growth in almost two years: UK PMI Manufacturing at Four-Month Low, but Faster Output Growth Points to Resilient Recovery. See why Eurozone factory output hit a 52-month high, and why the recovery still isn’t being driven by fresh demand: Eurozone PMI Manufacturing at Three-Month High, but Recovery Still Lacks Fresh Demand. Read how AI and semiconductor demand are offsetting Middle East-related cost pressures in Japan’s factory sector: Japan PMI Manufacturing Finalized at 54.5, AI Demand Offsets Middle East Headwinds. See why Australia’s manufacturing rebound to a six-month high still comes with a fragility warning: Australia Manufacturing PMI Finalizes at Six-Month High, Yet Inflation and Supply Risks Limit Confidence. Read the three encouraging trends inside China’s slower manufacturing expansion: China’s Manufacturing Expansion Slowed, but Three Trends Offer Encouragement. Inflation Data See why Swiss inflation’s slip to 0.4% is concentrated in imported goods, not domestic price pressures: Swiss CPI Slips to 0.4% in July on Lower Fuel and Airfare Costs. Frequently Asked Questions Q: Why did USD/JPY stall at 155 instead of continuing lower after confirmed intervention? A: Buyers emerged just ahead of the 155 support area before the pair could test it decisively, suggesting traders remain reluctant to challenge what has become an important technical level. The market still appears to believe last week’s intervention was aimed at preventing a rapid return above 160, not at engineering a sustained move below 155.

Q: Why is Yen strength showing up in crosses like AUD/JPY instead of pushing USD/JPY lower? A: Instead of forcing USD/JPY through support, demand for the Japanese currency found another outlet in the crosses. AUD/JPY led losses, followed by NZD/JPY, GBP/JPY, CAD/JPY and CHF/JPY, a pattern that points to a broader reduction in Yen-funded carry trades rather than outright Dollar weakness.

Q: Why did Brent gap lower again despite Iran signaling no immediate direct talks with the US? A: The gap reflected hopes of easing tensions after the US cancelled planned military strikes over the weekend and President Trump said negotiations with Iran would begin Monday. Iran, however, offered a more cautious assessment, with its Foreign Ministry saying discussions remain limited to Omani mediation over the Strait of Hormuz. Markets have grown reluctant to react aggressively to political statements alone, preferring tangible evidence of changes in shipping conditions or energy flows.

Key Takeaways Confirmed intervention marks a real shift in strategy: Japan and the US jointly confirmed last week’s coordinated Yen-buying operation, the first since 2011, and did so far faster than Japan’s usual practice of strategic ambiguity. USD/JPY is defending 155, not breaking it: The pair stalled just ahead of the support zone as buyers emerged, suggesting markets see intervention’s goal as capping a return above 160, not forcing a sustained move below 155. Yen strength got squeezed into the crosses instead: AUD/JPY, NZD/JPY, GBP/JPY, CAD/JPY and CHF/JPY all fell sharply, pointing to a broader unwind of Yen-funded carry trades rather than Dollar weakness. Oil’s gap lower reflects hope, not confirmation: Brent fell as low as $81.55 on prospects of US-Iran talks, but Iran’s Foreign Ministry says no direct negotiations are planned yet, just Omani mediation, keeping the conflicting-narrative pattern intact. This week’s US data matters more for Fed flexibility than for a September verdict: ISM Manufacturing, ISM Services, ADP and Friday’s payrolls will shape how much room the Fed has heading into next week’s CPI report, with Fed funds futures currently pricing just over 60% odds of a September hike. What to Watch Next Whether USD/JPY eventually breaks below 155 or continues bleeding out through the Yen crosses is one of the week’s key technical questions. On the data side, today’s ISM Manufacturing kicks off a run of releases culminating in Friday’s non-farm payrolls, all of which will help determine how much flexibility the Fed has heading into next week’s CPI report.

ActionForex

ActionForex.com was set up back in 2004 with the aim to provide insightful analysis to forex traders, serving the trading community for two decades. We started providing only a daily and a mid-day report, now known as Action Insights. Gradually, we added a lot more in-house contents to the site. Technical Outlook section was expanded to cover more pairs. In addition to that, Top Movers, Heat Map, Pivot Point Charts and Pivot Meters, Action Bias and Volatility Charts, are tools used by traders from all over the world.

The Canadian dollar was the weakest-performing major currency on Monday after softer-than-expected inflation data reduced expectations of further Bank of Canada policy tightening. Cooling headline and core inflation diminished Canada's relative yield advantage, weighing on the Loonie despite the central bank leaving its policy rate unchanged at 2.25%. Separately, reports that the US and Iran had signed a memorandum aimed at ending the conflict weighed on oil prices, adding further pressure to the oil-sensitive Canadian dollar. The loonie then came under renewed selling late in the US session after Reuters reported that Washington would impose new 50% tariffs on Canadian products.

Source: LSEG

Trump's Tariffs Add to Pressure on the Canadian Dollar The proposed 50% tariffs on Canadian products add a fresh headwind for the loonie by threatening Canada's export outlook and economic growth. Slower growth could reinforce expectations that the Bank of Canada will keep interest rates on hold or even consider easing if the economic impact proves material, reducing the Canadian dollar's yield appeal relative to the US dollar. While the full scope and timing of the tariffs remain uncertain, the announcement was enough to fuel another leg higher in USD/CAD.

USD/CAD Technical Analysis: US Dollar vs Canadian Dollar USD/CAD posted its largest daily gain in 23 sessions, rising 0.5% after finding support at the 50-day EMA and the 1.40 handle, strongly suggesting a swing low may be in place, at least in the near term. It has been just under a month since USD/CAD peaked, and recent developments suggest the pair could extend its rebound towards the 2025 high at 1.4140.

The 1-hour chart shows support has emerged around the weekly pivot point for now, although the sharp momentum shift below ¥116 suggests bears may look to sell into minor pullbacks. A break below 115.31 would bring the 115.00 handle into focus, followed by a key support zone around 114.60 where the monthly and weekly pivot points converge.

Source: ICE, TradingView

CAD/JPY Technical Analysis: Canadian Dollar vs Japanese Yen While crude oil prices didn’t exactly roll over on Monday, they did form doji’s on the daily chart to show indecision. Given but WTI and brent crude have stalled around their respective resistance levels, it removes another pillar of support for CAD/JPY – which is leaving bearish reversal signals of its own.

CAD/JPY formed a notable bearish engulfing candle on Monday to mark its second worst day of the month. Given it formed around 1.16 after a solid bounce, the case for a pullback was arguably growing anyway.

The 1-hour chart shows support has been found around the weekly pivot point for now, though the sharp momentum shift below 116 suggests bears may be seeking to fade into minor pullbacks, A break below 115.31 brings the 115 handle, and tight support zone around 114.6 into focus comprising of the monthly and weekly pivot points.  

Source: ICE, TradingView

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-- Written by Matt Simpson

Follow Matt on Twitter @cLeverEdge