The Canadian dollar versus the Japanese yen (CAD/JPY) is a popular currency pair among forex traders. CAD/JPY offers decent volatility and trading opportunities, but can be tricky to trade due to the involvement of a commodity currency.

This comprehensive guide will provide traders with everything they need to know about trading CAD/JPY. We’ll cover fundamentals, technical analysis, trading strategies, and more. Whether you’re a beginner looking to get started or an experienced trader wanting to sharpen your skills, read on to become a CAD/JPY expert.

Overview of CAD/JPY

The CAD/JPY currency pair pits the Canadian dollar against the Japanese yen. It is considered a cross currency pair since it does not involve the U.S. dollar.

Here are some key facts about CAD/JPY:

  • Nicknames – The Gopher, CADY
  • Pip Value – 0.001 CAD = 0.1 JPY
  • Typical Spread – 2-5 pips
  • Trading Hours – Sunday 5pm to Friday 4pm (EST)
  • Correlations – Strongly correlated to oil, USD/CAD, USD/JPY

CAD/JPY is unique in that it combines a commodity currency (the Canadian dollar) with a safe haven currency (the Japanese yen). This dynamic between the two economies makes for interesting price action.

The Canadian dollar tends to be very sensitive to oil prices since Canada is a major exporter of oil. When oil prices rise, Canada earns more revenue and the Canadian dollar strengthens.

On the other hand, the Japanese yen acts as a safe haven currency and appreciates during times of market uncertainty. During risk-off events, money flows into the yen causing it to spike higher.

Understanding this relationship between the comdolls and safe haven nature of the currencies is crucial to trading CAD/JPY successfully. Next, we’ll take a closer look at the factors that influence price action.

What Affects the CAD/JPY Rate

There are several key factors that impact the CAD/JPY exchange rate on a regular basis. Being aware of these dynamics allows traders to identify potential trading opportunities. Here are the most influential forces on CAD/JPY price action:

Oil Prices

As mentioned earlier, the Canadian dollar has a very strong correlation with crude oil prices. Canada is the 4th largest producer and exporter of oil in the world. As a result, the Canadian economy and currency are heavily dependent on the oil market. When oil prices start to rise, Canada earns more revenue leading to a stronger CAD. Conversely, falling oil prices are negative for the Canadian dollar.

Oil prices themselves are affected by global supply and demand. Major events like OPEC meetings can impact oil supply, while global growth forecasts influence expectations for oil demand.

For CAD/JPY traders, it’s important to keep an eye on developments in the oil markets. Monitor key reports like weekly crude oil inventories, OPEC meetings, and international agency forecasts. When oil rallies, it can provide good opportunities to go long CAD/JPY.

Bank of Canada (BoC)

The Bank of Canada (BoC) manages monetary policy and interest rates in Canada. The BoC aims to use interest rates to keep inflation low and stable around a 2% target.

BoC interest rate decisions and monetary policy reports have significant impact on the CAD. Rate hikes are seen as positive and bullish for the Canadian dollar. This is due to higher rates attracting foreign capital flows into Canada seeking higher yielding assets.

Make sure to watch BoC meetings closely, especially when rates decisions are to be announced. The BoC also gives a pulse on how the Canadian economy is performing, which can influence CAD pricing.

Bank of Japan (BoJ)

The Bank of Japan (BoJ) sets monetary policy for the Japanese economy. One of the BoJ’s key objectives has been to stimulate economic growth and battle deflationary pressures. As a result, Japan has sustained a low interest rate environment for many years.

BoJ policy decisions can cause sharp JPY moves. If the BoJ takes further easing actions like cutting rates deeper into negative territory, it’s bearish for the yen. On the flip side, any hawkish communication or policy shifts to reduce stimulus would be bullish.

In addition, the BoJ conducts currency intervention occasionally when JPY appreciation becomes too rapid. This involves selling JPY to deliberately weaken it. Intervention is rare but can really shake up CAD/JPY pricing when it occurs.

Risk Sentiment

Risk appetite in the markets also greatly impacts CAD/JPY. As mentioned earlier, the Japanese yen is viewed as a safe haven asset. When there is uncertainty and volatility in markets, traders flock to the safety of the yen. This causes the currency to rapidly appreciate.

On the other hand, the Canadian dollar does not have the same safe haven status. During risk-off events, the loonie tends to selloff alongside other commodity currencies like the Australian dollar.

Therefore, keep a close watch on overall risk sentiment by monitoring benchmarks like the S&P 500 and VIX volatility index. In times of market stress, CAD/JPY will usually decline as capital flows into the yen. When risk appetite returns, CAD/JPY normally rebounds.

Technical Levels

In addition to the fundamental drivers, CAD/JPY is also heavily influenced by technical levels and trader positioning. Like most currency pairs, CAD/JPY reacts to key support, resistance, and psychological levels.

Factors like order flow, speculative positioning, and option strikes can all impact trading activity around major technical levels. Traders should incorporate technical analysis along with fundamentals when trading CAD/JPY.

Now that we’ve covered what moves CAD/JPY, let’s look at some trading strategies to capitalize on these dynamics.

Trading Strategies for CAD/JPY

When trading CAD/JPY, it’s essential to have an edge with clearly defined strategies. Here are some of the most popular and effective tactics used by pros:

Range Trading

CAD/JPY can get stuck in prolonged ranges during periods of low volatility and unclear fundamentals. This presents opportunities to sell resistance and buy support. Range trading strategies work well when oil and yields are fluctuating within a defined zone.

Key levels like daily highs/lows, round numbers, and previous swing points can be used as range boundaries. Have tight stops or use options to limit risk on range trades.

Breakout Trading

When CAD/JPY finally does pick a direction and break out of a range, momentum can build quickly. Monitoring price action and volume around key levels will help spot breakouts early.

Have a game plan for playing breakouts to the upside and downside. Set entry orders above/below the breakout points to get positioned in the direction of the new trend. Use breakout strategies around high-impact events or when oil is trending strongly.

Correlation Trading

Trading CAD/JPY based on correlations can produce excellent opportunities. Focus on the links to oil and other correlated assets like USD/CAD, AUD/JPY, and S&P 500.

For example, buy dips in CAD/JPY when oil is holding support and advancing. Or, short CAD/JPY if stocks are plunging and volatility is spiking. Always check that correlations are strong before putting on correlation trades.

News Trading

There is nothing that moves currency rates more than news and economic data. Having a system to trade around high impact events can generate massive wins.

Create a trading calendar with upcoming events for Canada and Japan. Plan your entries around these events to capitalize on big moves in CAD/JPY. Fade the initial volatility spike, then ride momentum in the direction of the surprise.

Carry Trading

Carry trading involves going long the high yielding CAD and short the low yielding JPY to collect interest rate differentials. This strategy works best when volatility dies down and CAD/JPY moves into a gradual uptrend.

Use carry trades to take advantage of the BoC and BoJ monetary policy divergence. Fund carry trades on dips in the pair when CAD/JPY is oversold. Make sure to watch for any yen safe haven buying which can reverse carry trades swiftly.

The currency pair offers plenty of opportunities for range, breakout, correlation, news, and carry trades. Now let’s examine the best times to day trade the pair.

Best Times to Day Trade CAD/JPY

CAD/JPY sees decent trading volume throughout the Tokyo, London, and New York sessions. Here are some tips on the optimal times to trade:

  • Tokyo Open – There is often momentum at the Tokyo open following news and data. Watch for follow-through on moves originating in New York.
  • London Open – Large moves occur frequently around the London open. This is a good time for breakout strategies.
  • Tokyo Lunch – Volatility tends to die down during the Tokyo lunch break. Good time for range trading tactics.
  • New York Open – The New York open sees heightened volatility. Trade the initial volatility spike on key news events and data.
  • Oil Inventory Report – The weekly US oil inventories data causes big moves in CAD/JPY. Have a game plan ready for trading around the report release.
  • BoC Meetings – Trading around Bank of Canada meetings offers huge potential, especially when rate decisions are made.

In general, focus on overlaps between major trading centers like Tokyo-London and London-New York. Avoid slower periods like Fridays before US and Canada holidays when liquidity dries up.

Next, let’s dive into some CAD/JPY technical analysis techniques.

Technical Analysis of CAD/JPY

While fundamentals drive the big trends, technical analysis is crucial for timing trades and managing risk. Here are some of the most useful technical tools for trading CAD/JPY:

Price Action

Price action refers to analysing the movement of the CAD/JPY price on the chart. Key levels like daily highs/lows, round numbers, and previous swing points act as support and resistance.

Watch how price interacts with major levels. Breaks above resistance or failures at support can signal good entry points. Pay attention to candlestick patterns and momentum oscillators for clues on price direction.

Trend Lines

Drawing uptrend and downtrend lines on the CAD/JPY chart shows the overall trend bias. Trend lines act as dynamic support/resistance to trade around. Stay with the trend by buying bounces off the uptrend and selling into the downtrend.

Moving Averages (MA)

Moving averages smooth out price action and help identify the trend. The 50, 100, and 200 period simple moving averages (SMA) are most widely used. Price above the SMAs signals an uptrend, while lower shows a downtrend.


The Moving Average Convergence Divergence indicator (MACD) spots trend changes using two EMAs. When the MACD line crosses above the signal line, it indicates upside momentum is accelerating for a long signal. The opposite crossover signals bearish momentum for a short.

Bollinger Bands

Bollinger Bands plot bands around price based on volatility. When price tags the upper band, CAD/JPY is overbought for a short. Price hitting the lower band shows oversold conditions for a long. The SMA in the middle acts as support/resistance.


The Relative Strength Index (RSI) oscillator measures the speed and change of price movements. Above 70 signals overbought conditions, while under 30 is oversold. Trade the retracements on reversals out of overbought/oversold.

Combining price action with key indicators provides a solid technical framework for analyzing CAD/JPY. We’ll wrap up the guide with some tips for managing risk.

Risk Management When Trading CAD/JPY

Like all volatile currency pairs, proper risk management is crucial when trading CAD/JPY. Here are some guidelines for reducing risk:

  • Trade small position sizes of no more than 2% of your account balance
  • Use wide stops of at least 100 pips to withstand volatility
  • Scale into trades to get better average prices
  • Let profits run but move stops to breakeven quickly
  • Employ stop losses on all trades to contain downside
  • Supplement with options for defined risk if trading large size
  • Reduce risk around key events and when volatility spikes
  • Diversify positions over multiple pairs and asset classes
  • Keep trading journal to review performance and mistakes

With robust risk management, traders can feel comfortable navigating the swings and uncertainty of the CAD/JPY pair.


CAD/JPY offers plenty of opportunities but also comes with its fair share of risks. Use the knowledge in this guide to trade the pair like an expert. Follow the fundamentals, technicals, and strategies outlined above to capitalize on moves while limiting risk.

Remember to monitor oil prices, interest rate divergences, risk sentiment, and technical levels closely when trading CAD/JPY. With the right game plan, you can profit handsomely from the volatility of this fascinating currency pair.