Link to commodity markets: One of the key factors influencing the CADJPY pair is oil prices. An increase in oil prices typically leads to the appreciation of the Canadian dollar, which can drive the CADJPY pair higher. Conversely, a sharp decline in oil prices can weaken the CAD, which is especially important in fundamental analysis of this pair.

Interest rate differentials and monetary policy divergence: The monetary policies of the Bank of Canada and the Bank of Japan differ significantly. The BoC frequently raises or lowers interest rates in response to changing inflation, which directly impacts the attractiveness of CAD-denominated investments. In contrast, the BoJ has maintained very low interest rates for years, even adopting negative interest rate policies, making the yen a low-yield currency. Interest rate differentials between Canada and Japan can affect capital flows and the value of this currency pair.

Global capital flows: The Japanese yen is often used in carry trade strategies, where investors borrow low-yielding yen and invest in currencies with higher interest rates, such as the CAD. Such trades can lead to increased volatility in the CADJPY pair, particularly during periods of changing market sentiment and risk appetite.