Yen crosses are showing signs of bending but not breaking, as geopolitical instability and tariff threats create turbulence in the currency markets.

CAD/JPY is testing its lower Bollinger Band at 108.91 after President-elect Donald Trump warned of a potential 25% tariff on Canada once he assumes office. This marks the first time the pair has tested the bearish side of its 20-day Bollinger Band since the middle of September.

Typically, a close below a tightening Bollinger Band suggests that bearish momentum may be forming. However, several factors may prevent the yen from gaining significant ground.

First, the top of an expanding daily Ichimoku cloud provides support at nearby 107.52 level. Second, while option skews have tilted more in favor of the yen in November, turnover and implieds have been easing. Lastly, rising oil prices, as OPEC+ discusses output cuts, along with stable equity markets, should provide support for the loonie.

A similar picture is observed in EUR/JPY. The pair is finding support near the top of its daily cloud despite ongoing growth concerns in the region and continued Russia-Ukraine tensions.

The weekly cloud top is currently underpinning USD/JPY at 153.08 though a series of lower highs continues to weigh on pair. Only a drop below its 151.30 Nov. 6 low offers potential for unruly decline.

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(Robert Fullem is a Reuters market analyst. The views expressed are his own.)

((robert.fullem@thomsonreuters.com;))