CADJPY was mentioned back in June as a pair that had downside potential. The ascending channel from the 2015 low had started to look a bit exhausted and a favorable risk to reward ratio was certainly there.
Of course I didn’t know at the time that the catalyst for a move lower would present itself on such short notice. The 113 pip gap down on June 29th and subsequent inability of the market to fill said gap is testament to the bearish conviction behind the move.
After yet another gap down to start the current trading week, CADJPY finds itself trading just 20 pips above the next key support level at 96.80. This comes after the pair broke through channel support on June 30th and then retested the level as new resistance on July 1st.
I favor the downside so long as the pair remains below 97.65. To the downside, key support comes in at 96.80 with a break there exposing the March lows at 94.35. Alternatively, a break back above 97.65 would open up the door for a move back to the 98.64 handle.
Summary: Watch for selling opportunities while below 97.65. Key support comes in at 96.80, 94.35 and 91.75.