CADJPY Long

The Canadian Dollar (CAD) presents a compelling long opportunity against the Japanese Yen (JPY) heading into Q1 2025, backed by robust macroeconomic fundamentals and institutional sentiment. With the Bank of Canada (BoC) maintaining interest rates at 3.25%—significantly higher than the Bank of Japan’s (BoJ) negative rate of -0.1%—CAD benefits from a notable yield advantage, attracting capital inflows. Canada's 1.8% GDP growth forecast outpaces Japan's modest 1.2%, supported by a resilient labor market and rising oil prices, which serve as a key driver for CAD strength. Institutional positioning, as shown in COT data, reflects a net bullish bias for CAD, while JPY sentiment remains neutral to slightly bearish. Furthermore, Japan's reliance on energy imports leaves it vulnerable to rising global energy costs, adding to CAD's relative strength. However, risks remain, including a sharp decline in oil prices, a hawkish pivot by the BoJ, or a sudden global risk-off event driving flows into JPY as a safe haven. Overall, the macroeconomic backdrop, institutional sentiment, and yield differentials favor a bullish bias on CADJPY, making it an attractive long setup for Q1 2025.

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