[thrive_custom_box title=”” style=”dark” type=”color” color=”#fef5c4″ border=”fadf98″]
Important: I use New York close charts. Click Here to Use My Preferred Broker
[/thrive_custom_box]
The CADJPY has been trending higher since the U.S. elections in November 2016. In fact, it was the massive bullish pin bar on November 9, 2016 that triggered an immediate 1,000 pip gain.
With the pair up nearly 1,500 pips since the low of that November 9 pin bar, the air is getting quite thin. Of course, additional gains are still possible, but CADJPY bulls are beginning to look tired.
Look no further than the structure below.
The one thing I don’t like about this potential head and shoulders are the highs from December 2016 and January 2017. When trading the head and shoulders, I look for patterns that don’t have any price action next to the left shoulder.
But even if you disregard the formation above, the last thirteen months have carved a wedge pattern that puts buyers in the hot seat. What’s interesting is that it’s forming on the back of a 3,000 pip decline that began in late 2014.
It wasn’t the prettiest of patterns, but that drop in 2014 was the head of a thirty-month head and shoulders pattern. We discussed this particular reversal several times before and after it broke down in August of 2015.
Back to the last six months of price action. I’m not convinced that this is a 570 pip bearish reversal just yet. It’s going to take a daily close below the 87.30 area to get me onboard.
However, there is a level that could offer a short-term opportunity over the coming sessions.
The 89.45/50 area has served as a pivot since July of last year. As you can see below, CADJPY participants have respected the area on a daily closing basis (using New York close charts).
Buyers also just ran into some resistance below the 90.00 handle via the short-term ascending channel. The question now is whether or not they can keep prices above 89.45/50 over the next few sessions.
Today’s price action is once again testing the bullish conviction, but there isn’t much to do at the moment. If we do see a daily close at 5 pm EST back below 89.45, it could present a favorable selling opportunity. The next key support below that comes in at 88.15.
For now, I’m just watching this one to see what happens at 89.45/50. Bear in mind that things may be slower than usual this week as participants return from holiday break.
The pattern in the chart above also contradicts the bearish USDCAD view I mentioned last week; though the inverse correlation between the two pairs has weakened in recent weeks.
Still, it’s all the more reason to remain patient and let the market make the first move.
[thrive_custom_box title=”” style=”dark” type=”color” color=”#fef5c4″ border=”fadf98″]
Want to see how we’re trading this? Click Here to Join Justin and Save 70%
[/thrive_custom_box]
