Bank of Japan rate hike unlikely: CAD/JPY key levels to watch

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Canadian Dollar vs Yen gains 0.52% today

Highlights

Traders assign only a 25% likelihood to a Bank of Japan rate hike on October 30, easing immediate Yen pressures.
Markets may be overestimating future Bank of Canada tightening as core inflation slows and excess supply persists, raising downside risk for the Canadian Dollar.
CAD/JPY shows short-term bullish momentum with overbought signals, projected to trade between ¥110.76 and ¥111.88 in the next 2 to 3 days.

Reduced Bank of Japan hike expectations support yen stability

Traders have scaled back expectations for changes at the upcoming Bank of Japan rate meeting, with only a one-in-four chance of a hike anticipated on October 30. This reduced probability lessens immediate pressure on the Yen, helping to maintain recent levels in CAD/JPY, as confirmed by Fxstreet. Meanwhile, analysis suggests that forecasts for additional Bank of Canada tightening may be unwarranted given slowing core inflation and persistent excess supply, signaling possible vulnerability for the Canadian Dollar if market sentiment adjusts accordingly.

Short-term bullishness persists as momentum reaches overbought levels

Technically, CAD/JPY trades above the MA-20 at ¥110.92 and MA-50 at ¥110.82, but remains under the MA-200 at ¥114.56, reflecting a short-term bullish bias with a longer-term cap. The Ichimoku Kijun sits at ¥110.95, offering immediate support. Momentum indicators are mixed: the MACD gives a Buy signal, while ADX is Neutral. The RSI is elevated at 70.92 (Buy), and both the Stochastic RSI and CCI are in overbought territory, signaling stretched conditions. Bull/Bear Power shows continued buying momentum, with the Awesome Oscillator supporting ongoing bullish sentiment.

Range-bound price action likely amid bullish consolidation bias

Over the next two to three trading sessions, CAD/JPY is likely to remain bound within a ¥110.76 to ¥111.88 range based on expected volatility. The probability is weighted 78% toward a move higher, while a downside scenario is assigned a 22% chance. The most likely development involves consolidation between these levels. A break above ¥111.88 would suggest a bullish extension, while a fall below support at ¥110.76 or a decisive move through the Ichimoku Kijun could initiate a retracement.

Anton Kharitonov, expert at Traders Union, sees CAD/JPY holding steady as Bank of Japan rate expectations remain muted and Canadian rate hike forecasts look increasingly fragile. He notes that price action is stretched, with short-term bullish momentum but clear overbought risks. The near-term range appears tight and sentiment is cautious. "Unless the pair can break above ¥111.88 decisively, I stay defensive and watch for possible retracement if market sentiment shifts."

Earlier, analysts noted that CAD/JPY was under sustained bearish pressure driven by technical weakness. The current analysis, however, highlights a shift toward short-term resilience and potential consolidation, with traders advised to watch for a breakout above ¥111.88 as the signal for a renewed bullish move.

Source of Data: CAD Price Analysis by TU

The analysis is based on a proprietary model combining technical, on-chain, and expert data. Not investment advice. See methodology

The information is based on forecasts and does not constitute investment advice or a guarantee of future results. Market conditions may change. See our Disclaimer and Editorial Integrity for details.