Price action in CADJPY is looking interesting here. Unlike the moves we are seeing elsewhere against JPY, CAD has failed to breakdown. On the back of last week’s rally in oil prices and given the residual upside risks in the outlook for oil, CAD looks well placed to fend off the current JPY safe-haven rally.

The current move lower in CADJPY can be viewed as a corrective bull-flag pattern, suggesting room for an eventual breakout and continuation higher. Price is currently sitting back above the 99.09 level and while atop this marker, there is room for a breakout higher with 102.17 the key level for fresh longs towards 105.33.

Keep an Eye On

With JPY currently firmer on weakened risk appetite, any shift in this narrative should see JPY reverse lower near-term. Admittedly, potential drivers for a rebound in risk appetite look a little thin on the ground. However, just as we saw a late rebound in stocks last week, there is always room for a shift in positioning. Canadian CPI this week also has the potential to drive the pair higher. If prices are seen coming in above forecasts again, this will keep the focus on BOC tightening, lending support to CAD, particularly against JPY given the BOJ’s continued easing stance.