The CADJPY had a rough start in August. The decline that began on July 27th carried over into the first eleven days of this month before the pair finally caught a bid at 85.50.
Since that time, buyers have been in control and have driven the price 230 pips higher. However, the choppy price action over the last couple of weeks suggests that this might be consolidation following the early August selloff.
There is also a confluence of resistance near 88.20 that could come into play next week. This area is the intersection of a key horizontal level and the extension of an early stage ascending channel.
Whether or not the pair finds selling pressure at 88.20 or even trades that high next week is anyone’s guess. It’s also unclear whether this is a corrective move or the next leg higher following the rally that began in June.
We may not have the answers to those questions for quite some time. That aside, I will be watching to see how price reacts to 88.20 should buyers test the level next week. A sell signal from the area could offer a favorable opportunity to get short.
If this is indeed a corrective move, the bigger play would be a close below 4-hour channel support. Such a break would expose the August low at 85.50 followed by the next key support area at 84.50/75.
Alternatively, a close above the 88.20 handle next week would negate the bearish scenario. It would also pave the way for a retest of the current 2017 high at 89.72.
Want to learn how I trade price action? Watch the Free Webinar