Tue May 19
Abort the trade as soon as possible as market conditions have become less predictable. 130 pips captured.
Sun May 03
CAD/JPY is a Strong Buy as Signals Point to Undervalued
In recent weeks, CAD has navigated turbulent geopolitical waters effortlessly, catching a massive tailwind from surging global oil prices. Conversely, JPY has taken on heavy water, burdened structurally by its reliance on imported energy. CAD/JPY currently trades near 115.480, lagging significantly behind its true fundamental valuation.
Looking ahead, CAD/JPY is highly likely to sail to the upside over the upcoming weeks. The Bank of Canada maintains a hawkish tilt with rates at 2.25 percent, while the Bank of Japan remains hesitant at 0.75 percent. This structural yield divergence, combined with CAD oil-driven export revenues, creates a powerful current lifting the pair. As long as the Strait of Hormuz blockade keeps Brent crude elevated, CAD will remain a sturdy vessel. These combined forces should push the pair toward the 118.000 to 119.000 price levels.
The primary risk on the horizon is a sudden intervention squall from the Japanese Ministry of Finance, as USD/JPY hovers near the critical 155 to 160 mark. While official market intervention to prop up JPY would cause a sharp, temporary drop in CAD/JPY, professional operators should view this as a strategic advantage. Such a pullback would wash out weak retail longs, providing a heavily discounted entry point to buy CAD/JPY before overarching macroeconomic currents resume. Traders must monitor the geopolitical radar closely; a sudden, verifiable ceasefire in the Middle East would rapidly drain the oil premium, shifting the winds and potentially invalidating this bullish thesis. Until then, institutional flows and CFTC COT data—which show speculators holding a 39 percent net short position against JPY—strongly favor buying dips in this highly confident structural setup. Preparing for this volatility ensures capital is deployed efficiently when the storm temporarily breaks.
Trade Plan
Wait for a potential intervention-driven pullback to wash out weak hands, targeting a discounted buy zone near 114.3.
Set a take-profit zone near the Fundamental Value Band centerpoint, specifically targeting the 118.8 region.
Place a hard stop-loss exactly 200 pips below your chosen entry execution price to protect against catastrophic trend reversals.
Abort the trade immediately if a verifiable Middle East ceasefire is announced, as this would instantly collapse the energy premium.
Abort if the Bank of Canada unexpectedly signals immediate rate cuts due to shifting domestic economic data.