Sometimes all you need to find a favorable trade setup is a strong trend and a broken consolidation pattern. In fact, those two elements alone probably account for 80% of the setups I trade.
And like every yen pair over the last twelve months or more, CADJPY has been stuck in a strong bearish trend. Since topping out in 2014 amidst the massive thirty-two-month head and shoulders pattern, the yen cross is down nearly 2,500 pips.
More recently, last Thursday’s panic selling ended up being more than just another bearish day. The pair fell 280 pips intraday, making it one of the largest single session moves since the April 28th selloff.
But the real damage was done once the pair closed the day – and later the week – below the 82.15 handle. This level previously served as support on three separate occasions since early April and also intersects with former channel support near 81.90.
At the moment, risk-sensitive assets like CADJPY are seeing a bit of a respite from last week’s onslaught. However, I’m doubtful as to whether this sentiment is sustainable, especially considering the fear and uncertainty that has gripped the markets in recent weeks.
As always, time will be the judge.
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Great setup. Thanks Justin.
You’re welcome, Nitin.