Canadian GDP Drags CAD/JPY Lower: Recession Fears Mount

CAD/JPY pared some of its gains on weak Canadian GDP data.It hits an intraday low of 105.70 and  is currently trading around 105.75.

Canada’s real GDP contracted by 0.1% in April 2025, largely reflecting a pronounced 1.9% decline in the manufacturing sector—the most significant decrease since April 2021. This contraction encompassed both durable and non-durable goods, indicating broad-based weakness. Goods-producing industries as a whole registered a 0.6% reduction, while services-producing industries posted only a modest 0.1% increase, a gain that was effectively offset by a decrease in wholesale trade. Furthermore, preliminary estimates from Statistics Canada suggest that GDP likely declined by an additional 0.1% in May. These consecutive downturns have heightened concerns regarding a potential technical recession. Economists primarily attribute the contraction to the impact of U.S. tariffs and heightened global uncertainty, both of which have contributed to reduced business investment, weaker job creation, and slower consumer spending. Collectively, these factors have increased the probability that the Bank of Canada will implement an interest rate cut in July.

Technical Analysis

CAD/JPY is currently trading below the 34- and 55-EMA on the 4-hour chart. The immediate resistance is at 106.35; a breach above this level could shift targets to 107/107.35/108.25. On the lower side, near-term support is at 105.50,and a break below this support could lead to declines toward 104.78/104.50/103.85/103/102.50/10.65/101/100.

Indicator Trends

 CCI (50)- Bearish

ADX (14)-  Neutral

Trading Strategy Recommendation

It is good to sell on rallies around 106.28-30 with a stop-loss at 107 and a target price of 104.