CAD/JPY: Quasi-oil trade in the FX market reverses sharply

Some weeks back, when oil started to crash, it took quite some time for the traditional oil play in the FX market to play catch-up. Much to my frustration, CAD/JPY hung around 105 for what seemed like an eternity before it eventually followed oil lower.

Yesterday we saw the CAD/JPY reversal pick up momentum quite sharply, in fact it led the way initially against the oil price. That tells me that profit-taking was the main factor at play. Many of the big macros will have been short this pair and if/when they start buying back, the market will move sharply.