CAD/JPY Slides on Softer Canadian Inflation: Rate Cut Looms in September

CAD/JPY pared some of its gains after the Canadian CPI data. It hits an intraday low of 106.07 and is currently trading around 106.273.

With the headline CPI decelerating to 1.7% year-over-year from June's 1.9%, Canada's inflationary environment in July 2025 showed noteworthy moderation. This marked the fourth consecutive month under the Bank of Canada's 2% target. Although a sharp 16.1% drop in gasoline prices (driven by federal carbon tax removal) was the main cause behind this decrease, steady pressures remain visible in vital categories: food expenses increased 3.3% and shelter expenditures rose 3% yearly. With the 3-month annualized core particularly decelerating to 2.4% from 3.4%, the BoC's core inflation metrics also moderated. While some economists warn that this disinflationary trend could prove temporary if energy prices rebound or food prices stay high, the softer inflation print caused a weakening in the Canadian dollar and government bond yields as well as strengthened market expectations for a probable rate cut at the Bank of Canada's September meeting.

Technical Analysis

CAD/JPY is currently trading below the 34- and 55-EMA on the 4-hour chart. The immediate resistance is at 106.60; a breach above the 107.25 level could shift targets to 108/108.75/109/110. On the lower side, near-term support is at 106, and a break below this support could lead to declines toward 105/104.78/104.50/103.85/103/102.50/10.65/101/100.

Indicator Trends

 CCI (50)- Bearish

ADX (14)-  Bearish

Trading Strategy Recommendation

It is good to sell on rallies around 106.78.-80  with a stop-loss at 107.75 and a target price of 106