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- An rising chance of stagflation threat within the US might even see additional narrowing of the 2-year sovereign yield premium unfold between US Treasuries and JGBs.
- CAD/JPY is the second worst-performing main yen crosses up to now three months.
- CAD/JPY might even see one other spherical of impulsive down transfer sequence with the next medium-term helps coming in at 99.60 and 97.55.
It is a follow-up evaluation of our prior report “CAD/JPY Technical: Trump’s shock and awe trade policy manoeuvre erased CAD gains” printed on 21 January 2025.
For the reason that publication of our prior evaluation, the worth actions of CAD/JPY have declined by 6.6% to print a low of 101.38 on 11 March 2025, which hit the primary medium-term assist of 101.80 talked about in our earlier report.
Thereafter, it recorded a bounce of 4.4% to print a current excessive of 105.87 on 26 March forward of US President Trump’s 2 April “Liberation Day” announcement of reciprocal commerce tariffs. Canada has already been hit with 25% tariffs on sure items.
Regardless that the Canadian business has been left unscathed from the US reciprocal commerce tariffs introduced on 2 April, Canada will nonetheless be hit with the common 25% car tariffs that’s taking impact in the present day, 3 April, with different sectorial/industrial tariffs similar to lumber to be enacted by the US White Home quickly.
A number of Yen Crosses Have Began to Present Weak spot
Fig 1: 3-month rolling efficiency of G-10 JPY crosses with 2-year US Treasury/JGB yield unfold as of three Apr 2025 (Supply: TradingView)
Weak spot in a number of main G-10 yen crosses has resurfaced for the previous week, pushed by a narrowing of the 2-year sovereign yield premium unfold between US Treasuries and Japanese Authorities Bonds (JGBs), and rising systematic threat from US commerce tariffs woes.
Primarily based on a rolling three-month efficiency as of three April, the CAD/JPY is the second-worst performing (-4.9%) main yen cross pair, simply hovering above the worst hit USD/JPY (-5.8%) right now of the writing (see Fig 1).
Stagflation Danger within the US Could Reinforce Additional Yen Energy
Fig 2: College of Michigan Shopper Sentiment Index with inflation expectations as of Mar 2025 (Supply: TradingView)
The newest finalised College of Michigan Consumer Sentiment Index for March has plummeted to 57 from its prior month studying of 64.7. Shopper sentiment within the US declined for a 3rd consecutive month to hit the bottom since November 2022.
As well as, in the identical survey report, each the 1-year and 5-year inflation expectations soared considerably, with the 5-year forward-looking inflation gauge hovering to a 32-year excessive of 4.1% in March.
These current observations counsel a rising threat of stagflation within the US economic system on account of uncertainties in development prospects and the price of dwelling, that are exacerbated by the present US White Home’s erratic and aggressive commerce tariff coverage.
An rising chance of a stagflation setting might even see an extra narrowing of the 2-year sovereign yield premium unfold between US Treasuries and JGBs as US financial development and company earnings get revised downwards, in flip, benefiting the yen that takes up the function as a foreign money hedge (see Fig 2).
CAD/JPY’s Bearish Response Under its 50-day Shifting Common
Fig 3: CAD/JPY main & medium-term tendencies as of three Apr 2025 (Supply: TradingView)
The current corrective rebound of the CAD/JPY from its 11 March low might have reached its terminal level on 26 March as value actions of the CAD/JPY have formed a bearish response candlestick after a retest on its downward sloping 50-day transferring common, and the previous long-term secular ascending channel from the March 2020 low now turns right into a pull-back resistance after value actions breached under it on 21 February 2025 (see Fig 3).
As well as, the every day RSI momentum indicator has flashed out a bearish momentum situation which helps the beginning of a possible impulsive down transfer sequence.
Watch the 108.30 key medium-term pivotal resistance (additionally the 200-day transferring common), and a break under 101.80 exposes the following medium-term helps at 99.60 and 97.55.
Alternatively, a clearance above 108.30 invalidates the bearish state of affairs for the following medium-term resistances to return in at 111.45 and 115.90 subsequent.
