Since carving out a high in mid-December following the Trump inspired rally, the CADJPY has dropped 840 pips. We looked at the pair earlier this month, but buyers never managed a close above channel resistance that extends from the February 15th high.
So here we are 100 pips lower still focused on the same channel. But the lower price is a good thing if you’re interested in buying, an idea I’m not entertaining right now. Buyers would need a close above the confluence of resistance at 82.00, which looks highly unlikely at the moment.
Instead, I’m interested in a drop toward 80.55. The level attracted a bid on Wednesday and Friday of last week and could come under fire again shortly.
Before we get to that, let’s discuss something that could affect the viability of a trade here. You have no doubt heard there will be a run-off election in France on May 7th. The first round caused the CADJPY to gap up more than 100 pips due to the yen’s sensitivity to risk.
The upcoming May 7th vote will likely trigger another weekend gap. Which direction is anyone’s guess but I won’t be carrying exposure when it happens. As such, any trade that occurs this week will be given a five-day lifespan before being liquidated.
If sellers take out the 81.50/60 area on a 4-hour closing basis, there’s a good chance we’ll see a move back toward the 80.50 area and perhaps 80.20. See the smaller ascending trend line below to find out why I’m favoring 81.50/60.
I’m on the sideline for now, and if we do get a favorable opportunity, I’ll be out of the position by May 5th at the latest. Keep in mind that Canada reports GDP this Friday at 8:30 am EST.
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