🔍 CAD/JPY Lagging Oil? Potential Catch-Up Play as Middle East Tensions Rise

Recent price action suggests that CAD/JPY may be undervalued relative to the surge in crude oil. As this chart illustrates, CAD/JPY (magenta line) has historically moved in close tandem with US Crude Oil Spot prices (orange), with a correlation coefficient near 0.8.

However, despite the sharp uptick in crude prices amid renewed geopolitical tensions in the Middle East, CAD/JPY has not yet followed suit — a divergence that may not last long.

According to Societe Generale, “CAD/JPY has lagged the oil spike by a big margin, and thin markets into the weekend could see that change.”

As Canada remains a major oil exporter, CAD often strengthens when oil rises. If this relationship holds, a mean-reverting move higher in CAD/JPY could be imminent.

For investors and macro traders, this could represent a tactical long opportunity—particularly in the short term.

✅ Stay vigilant. Volatility could rise quickly heading into the weekend.

圖：CAD/JPY and US Crude Oil Spot