CAD/JPY trade to its highest levels since January 2018
This was the best FX pair in 1H 2021 and it is coming back to life in the past two weeks as the loonie is surging higher on the back of more solid fundamentals, largely backed by a rise in oil prices with WTI now back above $81 on the day.
Buyers are aiming to take out daily resistance from the May high @ 91.19 currently and are quick to set their sights on key resistance from the 2017 and 2018 highs @ 91.58-64. The high today is already touching 91.55 as the pair climbs by 0.6%.
Adding to the optimistic technical picture for the loonie is USD/CAD breaking below its 30 July low @ 1.2422 and eyeing a push back below 1.2400 at the moment.
The thing to note about the push higher today in the pair is that it comes alongside continued weakness in the yen as bond yields are keeping elevated.
There was scope for a bit of a pause in the past two days but 10-year Treasury yields are up 1.2 bps to 1.56% now and 30-year Treasury yields are up 3 bps to 2.07%.
With the FOMC minutes reaffirming Fed taper expectations yesterday and US inflation staying elevated (and likely to keep that way for many more months), it is tough to see any dip in yields go beyond the stretches of a mere retracement.
As such, that adds to a supportive factor for yen pairs and another upside breakout in CAD/JPY could just see the upside run and momentum extend much further in the days/weeks to come, even more so if oil prices continue to stay perky during the period.
