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CADJPY turned out to be one of our best trades in 2018.
Following the close below ascending channel support on December 5th, the yen cross dropped 800 pips.
I mentioned this short setup on December 5th.
What’s incredible is that our 400-pip target was reached in just ten trading days following the retest of new resistance on the 13th.
However, since the January 3rd flash crash, CADJPY has been in rally mode.
That isn’t surprising though. Flash crashes like the one earlier this month have a way of flushing the market and triggering at least a short-term bounce.
The question is whether this is a corrective move within a bearish trend or the start of something more substantial.
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As of now, it appears to be a mere correction. But then we have to determine what could trigger the next selling opportunity.
This is where equidistant channels can help.
If we draw an ascending channel starting with the January 9th high, we get a pattern that could hint at the next leg lower.
For now, it’s going to take a close below channel support to open up downside targets. Those include 80.55, 78.70 and the year-to-date low of 77.00.
There’s no telling when that might occur. It could be this week or a month from now.
As such, it’s vital to stay patient and wait for the market to make the first move.
Note that we could also see a retest of the 83.80 resistance area. Of course, this channel needs to remain intact for a few more weeks for that to occur.
Justin Bennett is an internationally recognized Forex trader with 10+ years of experience. He's been interviewed by Stocks & Commodities Magazine as a featured trader for the month and is mentioned weekly by Forex Factory next to publications from CNN and Bloomberg. Justin created Daily Price Action in 2014 and has since grown the monthly readership to over 100,000 Forex traders and has personally mentored more than 3,000 students.Read more...
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