Oil Shock Is Working Twice for CAD/JPY — Can It Reach 120?

The article argues that CAD/JPY could continue higher toward 120 as Brent crude trades above $90, boosting Canada’s terms of trade while also lifting global bond yields and pressuring the yen through wider carry-trade differentials. Unlike the June rally, Canada’s macro data now provide independent support: May GDP rose 0.3% m/m, July payrolls jumped 75K versus 15K expected, unemployment fell to 6.4%, and CPI accelerated to 3.0% y/y. The piece says this mix could reopen Bank of Canada hike expectations. However, the yen remains vulnerable to intervention risks if USD/JPY nears 160 and to a potentially more hawkish Bank of Japan meeting in September. Technically, CAD/JPY has reclaimed its 55-day EMA, with 116.45 and 117.50 as key resistance levels; a break above 117.50 would open 120 and 120.86. The main downside risk is that if oil stalls and CAD/JPY loses momentum, the rally may prove to be mainly yen weakness rather than durable CAD strength.