The CAD/JPY exchange rate continued rising, reaching its highest level since July 2024 as the war in Iran exposed Japan to a major oil shock. It jumped to a high of 116.35, up sharply from last year's low of 101.17.
Japan and Canada Macro Data
The USD/CAD pair continued its strong rally as the war in Iran started. This war will have a negative impact on Japan, a country that relies on energy imports from the Middle East countries like Saudi Arabia, Qatar, and the United Arab Emirates.
Crude oil continued rising on Monday and is now hovering at its highest level in years, a trend that may continue in the foreseeable future as the war continues. The same is happening in the natural gas market, where prices have continued rising after Qatar slashed its production because of Iranian attacks.
While Canada is exposed to the new energy shock, it is better placed as it is one of the biggest oil-producing countries in the world. It produces over 5 million barrels of oil per day.
The CAD/JPY exchange rate will also react to key macro data from Canada and Japan this week. Japan will release its GDP data on Tuesday. Economists expect the report to show that the economy grew by 0.3% in the fourth quarter after contracting by 0.7% in the previous quarter.
Japan will next release the latest producer price index (PPI) data on Wednesday and foreign bond and stock purchases. Analysts still expect the rising energy prices may push the bank to hike interest rates again in the next meeting.
The CAD/JPY exchange rate will also react to key macro data from Canada, including the upcoming trade report on Thursday and jobs report on Friday. Economists expect the upcoming report to show that the economy created 9.5k jobs in February, as the unemployment rate rose to 6.6%
CAD/JPY Technical Analysis
The weekly chart shows that the CAD/JPY exchange rate formed a double-bottom pattern at 101.60 and a neckline at 111.55. It moved above the neckline and retested it on February 2nd. A break-and-retest pattern often leads to a continuation.
The pair is being supported by the dynamic 50-week moving average, while all oscillators like the Relative Strength Index (RSI) and the Percentage Price Oscillator (PPO) have continued rising.
Therefore, the pair will likely continue rising as bulls target the key resistance level at 118.81, its highest level in July 2024.