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The markets appear to be in transition at the moment, which is why I’ve decided to scale back my trading somewhat. During times like this, it’s often best to stand aside and wait for things to reset before putting any capital at risk.
That said, we do have a potential setup on CADJPY that has the potential to produce some nice gains. The pair recently closed above the 95.70 key level, which gave reason to believe that the pair was bound for higher prices. This level can be seen acting as support and resistance since 2005.
However in stark contrast, yesterday saw a close back below this level by more than 30 pips.
CADJPY 4 hour chart:
This brings our attention back to the 95.70 level as key resistance. To the downside we have the 94.74 level that will act as support, giving us about 100 pips to work with. I do expect an eventual move past the 94.74 level, at which time we can either add to an existing position or initiate a new short position.
Summary: Watch for bearish price action on a retest of 95.70 as new resistance. More aggressive traders can use a blind entry. Key support comes in at 94.74 with an eventual target of the 2015 lows around 91.70.