October 13, 2021 14:34:25

The yen has suffered massively over the last few days, especially against commodity-related currencies. The sell-off in US Treasuries has seen bond yields surge north, although they have dropped back more recently. With “team transitory” close to raising the white flag, especially after today’s elevated US inflation data, it’s tough to see a major turnaround in bonds which are a key driver of the yen.

High oil and energy prices have bolstered commod-$s like CAD. Japan’s position as a big energy importer does not help the yen. Its central bank also contrasts hugely with those more hawkish banks like the Bank of Canada who are already acting on rising price pressures. Friday’s monster jobs report simply adds to the case for more action by the BoC at its meeting in a few weeks.

CAD/JPY nears key long-term resistance

This pair has risen in eight out of the last nine sessions. After dipping below 85 for the third time since July, prices have ramped higher initially breaking through trendline resistance. The march north then paused briefly around 88 and previous resistance which represents the halfway move of the recent high to low jump.

We are now challenging the mid-year peak at 91.18 having made a new high at 91.41 yesterday. This area is closing in on the top of the range going back to 2016 around 91.58/63. Prices are very overbought on numerous indicators although trend signals are still aligned bullishly. If bulls can consolidate recent gains, the pair may pick up above 91.60. A pull back sees initial support around 89.79/90.00.