The pair has been on a stellar run higher over the past few weeks, building on the momentum from the double-bottom around 85.00 and is now trading up to 91.20.
For the optimists, there is the potential for the pair to run higher from here despite the already notable gains in recent weeks. The pair already showed much poise after the breakout last week and we're now seeing a test of the previous year's highs around 91.17-19 in the last few sessions - European trading today included.
Considering the fundamentals, the upside run has the potential to extend further as oil prices are looking perky and the loonie coping well domestically and also benefiting from higher commodity prices in general.
The bond market is still key though and while yields saw a bit of a retreat yesterday, it is hard to really call for a significant turnaround in the selling in bonds for now.
With the Fed going to taper and inflation running hot globally, yields are likely to at least keep more elevated in the weeks to come.
The technical perspective also bodes well for the loonie with USD/CAD close to testing the July low @ 1.2422 after breaking below its key daily moving averages @ 1.2490-07.
As such, CAD/JPY testing key resistance for now could be an ominous signal of an extended breakout perhaps. The 2017 and 2018 highs @ 91.58-64 lurks nearby but beyond that, it is tough to put a lid on gains in the pair once that gives way.