CAD/JPY: BOJ & jobs data threaten multi-year rally

Last week, the primary currency market driver was the release of the US PCE Price Index, the Federal Reserve's preferred inflation gauge, which climbed to 3.8% year-on-year, its highest level in nearly three years. In the APAC region, unexpected volatility hit the NZD pairs after the Reserve Bank of New Zealand (RBNZ) held rates but signalled future hikes¹, while Australian headline CPI came in lower than anticipated. This week's schedule² features the US ISM Manufacturing PMI on Monday and Australia's GDP data on Tuesday. The main event occurs on Friday, June 5, with simultaneous US and Canada employment reports at 8:30 AM EST. US Non-Farm payrolls (NFP) are forecasted at 85K with unemployment holding at 4.3%.³

The NFP data releases precede a period of potential intense volatility next week, dominated by the US Consumer Price Index (CPI) release on June 10th and multiple central bank decisions scheduled for June. These pivotal decisions are taking place as the ongoing war continues to fuel energy price shocks, contributing to persistent inflation and shifting global interest rate expectations toward a "higher-for-longer" policy stance.

The CAD/JPY cross is positioned for intense headline risk in the coming weeks, potentially acting as a direct battleground between shifts in Canadian labour data and brewing Bank of Japan (BOJ) policy changes. On the Canadian side, Friday's Employment Change release is forecasted to rebound to 10.0K following an unexpected contraction of -17.7K in April 2026, a print that will either confirm a stabilising labour market or fuel expectations for a more dovish Bank of Canada. Meanwhile, across the Pacific, the backdrop for the yen is rapidly shifting. While headline Tokyo inflation recently cooled slightly to 1.4% in April due to government utility subsidies, underlying energy prices remain a challenge. This sticky inflationary reality, combined with a severely weakened Yen, has aggressively pulled forward market expectations for a 25 basis point BOJ interest rate hike at their June meeting, with markets pricing in a roughly 78% probability of a move up from the current 0.75% policy rate.⁴ For CAD/JPY traders, a combination of a softer Canadian jobs report and hawkish, inflation-wary commentary from BOJ Governor Ueda on Wednesday could trigger a sharp unwinding of the pair's multi-year rally.

The weekly chart for CAD/JPY, reflects that the pair is currently sitting at a critical technical inflection point. After a powerful multi-year uptrend, price action is showing technical signs of exhaustion, setting up a textbook bearish divergence scenario just ahead of this week’s high-impact economic drivers.

• The most prominent feature on this chart is the clear bearish divergence between price and the momentum indicators. While the price made a higher high between March and May 2026 (marked by the rising black line at the top), both the RSI (14) and the Stochastic Oscillator (14, 1, 3) printed distinctly lower highs (marked by the descending black lines). This indicates that the recent upward push lacked genuine buying momentum.
• Moving Average Confluence: The price is currently trading right around 115.380, tightly coiled within the 9-period Exponential Moving Average (EMA, blue line) and the 21-period Moving Average (MA, green line). A decisive weekly close below these averages would confirm a loss of bullish control.

The traditional monthly pivot points are tightly clustered around the current price

• Resistance (R1): 116.325 – This serves as the immediate ceiling. Bulls need to break and remain above this level to invalidate the bearish divergence and eye a retest of the recent cyclical highs.
• Monthly Pivot (P): 115.228 – The market is currently hovering right on top of this line. How the daily/weekly candles close relative to this level may dictate the immediate bias.
• Support (S1): 114.358 – This is the immediate downside support, lying just below the moving averages confluence. A clean break below S1 adds weight for the bearish divergence to play out.
• The 2020 trendline: If a broader reversal takes hold—perhaps triggered by economic data releases, the long term support level sits much lower where the 2020 trend line intersects with the annual pivot point of 110.02.

Footnotes:

1 - https://www.rbnz.govt.nz/news-and-events/news/2026/05/ocr-held-at-2-25-percent

2- https://www.marketpulse.com/tools/economic-calendar/

3 - https://www.bloomberg.com/markets/economic-calendar

4- https://www.bluegamma.io/central-banks/central-bank-interest-rate-forecasts/the-bank-of-japan-interest-rate-forecast