CAD/JPY Surges on Hot Canadian Inflation Data: Will the Bank of Canada Hold Rates?

CAD/JPY gained slightly after strong Canadian inflation data. It hits an intraday high of 108.563 and is currently trading around 108.40.

Canada’s annual inflation rate (CPI) climbed to 2.4% in September, slightly above the expected 2.2% and reaching its highest level in six months. This uptick was largely due to a smaller drop in gasoline prices compared to August, along with higher food costs (up 3.8% from 3.4%) and increased expenses for travel and shelter. Core inflation was mixed: CPI-Trim edged up to 3.1% while CPI-Median remained steady at 3.2%. Although the rise is likely a temporary result of base-year effects, it reduced the chances of a Bank of Canada rate cut on October 29 from 77% to 69%. Still, most analysts expect a 25-basis-point cut, with some calling the data “good enough for a hawkish cut.”

Technical Analysis

CAD/JPY is currently trading above the 34- and 55-EMA on the 4-hour chart. The immediate resistance is at 108.60; a breach above that level could shift targets to 109/110. On the lower side, near-term support is at 107.80,and a break below this support could lead to declines toward 107/106.20/105/104.78/104.50/103.85/103.

Indicator Trends

 CCI (50)- Bullish

ADX (14)-  Bullish

Trading Strategy Recommendation

It is good to buy on dips around 107.78-80  with a stop-loss at 107 for a target price of 110.