CADJPY has been volatile of late to say the least. However, after sliding more than 1,300 pips following last year’s break of wedge support, the pair has remained range-bound between 83.60 and 79 for the better part of February.
Speaking of volatility, yesterday proved to be one of the more active sessions we’ve seen over the last few months with the pair rallying 200 pips from the session low. What’s more, CADJPY appears to have broken a key level that is best viewed on the 4-hour chart.
I drew this level last week when it looked as though we might get an inverse head and shoulders pattern off of the February 11th low. Although things didn’t play out that way, the rejection between the 17th and 18th of February highlighted the fact that this level is indeed significant.
With yesterday’s rally taking out resistance, there’s a good chance that CADJPY is gearing up for a run at the 84.80 handle and possibly the February high at 87. That being said, yesterday’s extensive move higher along with the recent increase in volatility means that a pullback to new support is likely before the next leg up materializes.
As additional confirmation that the level is likely to hold, I’d like to see it respected as new support on a 4-hour closing basis. This would give me further conviction in my trade idea and also provide a strategic area from which to hide my stop.