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 106.57 and is currently trading around 106.798.

Canada's Consumer Price Index (CPI) increased 1.9% year-over-year in August 2025, up from 1.7% in July but under the anticipated 2.0%; a 0.1% monthly drop shows milder price pressures. Driving the headline rise were gas prices, which dropped 12.7% annually against 16.1% in July; CPI excluding gasoline increased 2.4%. Food inflation was uneven; beef and processed meats rose 12.7% and 5.3%, respectively; however, prices of fresh fruits fell 1.1%. Though yearly falls lessened, cellular services increased 1.5% monthly. Although core inflation is beyond the Bank of Canada's 2% target, poor economic indicators like GDP decline and growing joblessness raise the probability of a 25 money markets currently pricing in an 87% probability for basis point rate reduction at the next meeting.

Technical Analysis

CAD/JPY is currently trading above the 34- and 55-EMA on the 1-hour chart. The immediate resistance is at 107.20; a breach above the 107.20 level could shift targets to 108/108.75/109/110. On the lower side, near-term support is at 106.50,and a break below this support could lead to declines toward 106/105/104.78/104.50/103.85/103/102.50/10.65/101/100.

Indicator Trends

 CCI (50)- Bullish

ADX (14)-  Neutral

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