The crude oil market got a bit of noisy behavior on Friday, as Trump stated that the peace deal with Iran isn’t in effect anymore. The oil correlation and the jobs report in Canada have both been influential.
CAD/JPY and Oil
The crude oil market got a bit of a shock in the middle of the day as the United States announced that the ceasefire between the USA and Iran is over, despite the fact that they will continue to talk. This had a significant influence on the Canadian dollar, which was also reacting to the job numbers in Canada being almost twice as expected. This makes the Canadian dollar against the Japanese yen very interesting at the moment.
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The broader market context is one of uncertainty and, of course, questions about what is going to happen in the Middle East. The Middle East continues to cause volatility, and the Canadian dollar is one of the market's favorite ways to play the idea of crude oil going up or down. Contrast that with the other currency in this currency pair, the Japanese yen, which is decidedly soft.
Geopolitical Oil Shocks and Key Technical Levels
The recent market behavior in this CAD/JPY pair has been somewhat sideways, but that's telling considering just how weak the Canadian dollar has been against other currencies, such as the US dollar. The 115 yen level near the 50-day EMA, I think, shows a bit of resistance, and if we were to break above there, it's possible that the buyers could come into the market, but at the same time, we have to worry about whether or not the oil market has more to say going forward. After all, we have a long weekend ahead of us that will almost certainly feature some type of chaos coming from the Middle East. This weekend could bring a completely different look to not only this pair but many others involving the Canadian dollar.
The alternative scenario is that we fall from here, and we go looking to the 200-day EMA. I think in this environment, you would be talking about oil dropping and perhaps a major situation where risk appetite gets eviscerated. That could open up a move down to the 112 yen level, an area that was important at the beginning of 2026. This should bring in a certain amount of market memory if we do, in fact, drop to that region.
On a Positive Move…
To the upside, the 117.50 yen level was the swing high that I think we'll try to get to eventually, but keep in mind that the Bank of Japan does intervene from time to time. At this point, I anticipate that most of what's been driving this pair will continue to be what drives this pair in the future—mainly oil and risk appetite, along with the Bank of Japan. The Canadian dollar itself isn't exactly the strongest currency to play, but if you get a pure oil shock, this is a typical play, the Canadian dollar to start buying and reach towards that high. This could take some time, but I think this is what a lot of traders might be thinking at this point in time.
All things being equal, this is a pair that many traders could be sleeping on, and as a result, the market is likely to continue to see sudden surges of momentum, but at this point, I would also suggest that from a longer-term standpoint, it's still bullish in general. I have no interest in trying to short this pair, at least not quite yet, as I am very negative on the Japanese yen.
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