CAD/JPY ran into the 2017 highs
The Canadian dollar was the top performer in the first half of the year while the yen lagged. It was an impressive move for the pair as it rose 10 full cents to 0.9100 before a recent pullback to 89.52.
It was a one-way move from there but it stopped where the technicals said it should: just ahead of the 2017 highs.
So far it looks like it could be a hiccup similar to the one in April. The low so far was on the retest of the hold high, near 0.8800., which is a healthy pullback.
Fundamentally, the rise in oil prices and hawkish tilt at the Bank of Canada are more reason for optimism, though you could argue that’s already priced into the chart.
Ultimately, this pair is a growth trade and what it does next will depend on how strong the global economy emerges from Covid-19.
I think CAD has been held back by flows at quarter-end and that will help lift it next week (tomorrow is a holiday in Canada). Much of that will depend on how the market reacts to non-farm payrolls.
The next big catalyst is likely to be the July 14 BOC decision. I anticipate a large taper that kicks off another leg higher for the loonie.