During the summer months, it’s sometimes necessary to look a little closer to find setups due to the slowdown that often takes place. The CADJPY is a perfect example of a pair that is quietly developing in a way that could produce a favorable setup over the coming sessions.
The 100 pip range between 88.20 and 89.20 represents consolidation. It began forming following the 830 pip rally between June and July and is therefore likely a continuation pattern.
With this in mind, I’ll be watching for a daily close (5 pm EST) above the range top at 89.20. Such a close would pave the way for a move toward the next key resistance area near 90.55.
That figure has been a key factor since 2005 and is also the 2014 low. Additionally, it’s the 50% retracement when measuring from the 2014 high at 106.50 to the 2016 low at 74.80.
While it is possible to try to play this on the 4-hour time frame, the CADJPY tends to be difficult on the intraday charts. In other words, the odds of a false break to the upside is significantly higher on anything lower than the daily time frame.
For this reason, I’m going to stand aside until we see a daily close above resistance. And by the look of things as I type this, there’s a good chance of that happening this week.
As long as support at 88.20 holds on a daily closing basis, I’ll continue to watch for a buying opportunity here. However, as mentioned above, it’s important to wait for a close above the range top at 89.20.
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