CAD/JPY Market Note: Navigating the 110.31 Pivot on MLK Day

The CAD/JPY cross is experiencing elevated price action during the London morning session as a combination of U.S. holiday liquidity gaps and escalating global tariff risks steer investor sentiment. With U.S. cash markets closed for Martin Luther King Jr. Day, the pair is trading as a cross-driven play, requiring a levels-first approach rather than momentum chasing.

Market Drivers: Tariffs and Tiny Liquidity

The primary catalyst for today's volatility is the escalation of U.S. tariff risks tied to European and Greenland headlines. This has lifted the global political risk premium, compressing risk appetite across the board. In response, defensive currencies like the Japanese Yen (JPY) and Swiss Franc (CHF) have attracted steady bids, while the Canadian Dollar faces pressure from the broader risk-off tone.

Because U.S. markets are offline, the hand-off from London to New York has been characterized by position maintenance rather than fresh risk-taking. Traders should remain wary of stop-runs and sharp mean-reversion moves around well-advertised technical levels.

Session Recap: From Headlines to Mean Reversion

Early London trading saw an initial impulse lower as JPY/CHF attracted defensive demand. However, by 10:10 London time, price action shifted toward mean reversion. Market makers have begun leaning on established ranges, retracing early extremes as liquidity improved. The indicative spot remains anchored near 110.37, within a daily range of 109.85 to 110.78.

Technical Levels to Watch

The 110.31 level serves as the critical pivot and balance point for the remainder of the session. A clean reclaim or loss of this level will likely separate intraday noise from genuine follow-through.

• Resistance: 110.78 and 111.50
• Support: 109.85 and 109.00

In this high-volatility regime, intraday flows are expected to target stops sitting just beyond 111.50 on the upside and 109.00 on the downside. Execution should favor scaling in and out near these edges with conservative sizing.

Tactical Playbook and Scenarios

Base Case: Range-Trade (62% Probability)

As headline risk stabilizes and holiday liquidity limits follow-through, CAD/JPY is expected to remain inside the 109.85–110.78 envelope. In this scenario, fading moves toward the edges of the range is likely to be more productive than trading breakouts. Market focus is already rotating toward tomorrow's China LPR decision and UK CPI data.

Alternative Scenarios

There is a 19% probability of a risk-on extension if tariff narratives de-escalate, which could push the pair above 110.78. Conversely, a 19% probability exists for a risk-off reversal, where fresh geopolitical escalation drives a renewed defensive bid for the Yen, potentially breaking the 109.00 support floor.

For more context on how holiday sessions impact these setups, refer to our analysis on CAD/JPY MLK Day Gap Risk.

What to Watch Next

Market participants should keep a close eye on the 24-hour horizon, specifically the China Loan Prime Rate (LPR) and UK CPI. These releases will provide the next major fundamental catalysts once U.S. depth returns on Tuesday. Any further escalation in trade policy language will likely override technical signals in the near term.

Related Reading

• CAD/JPY Analysis: Navigating Risk Whipsaws and Rate Spreads
• Holiday Liquidity Risks: Why Thin US Sessions Distort Macro Signals
• USD/JPY Market Note: Safe-Haven Bid vs Rate-Differential Anchor