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The late rally in the Canadian dollar vaulted it just ahead of the US dollar as the top performing G10 currency last year. The yen was at the bottom of the pack.
The main thrust of the rally in the pair was the recovery from covid and the associated rally in commodities, along with the inflationary impulse due to prior lockdowns and high goods demand.
It was a nice move in CAD/JPY early last year that initially topped in June, then found its legs for a new high in October before falling back on omicron. With the market increasingly moving on from omicron, could there be more to come? After all, the recovery from covid continues and we’re early in a rate hike cycle.
My main worry is China getting hit by omicron closures but there’s an argument that will also be inflationary as supply chains are once-again disrupted.
Technically, the recent retracement sets up the potential for new highs, with little standing in the way if 93.00 is broken.
The pair is up 1% today, or 91 pips, to the highest since November 10.