CADJPY continues to look weak after extreme volatility in late August pushed prices below the neckline of the thirty-five month head and shoulders pattern.
This is an area that has now been tested as new resistance on two separate occasions. The second retest produced a bearish pin bar that continues to play out favorably for traders, especially those who managed a 50% entry.
However, as mentioned in previous weeks, the break that is likely unfolding at the time of this writing could turn out to be much more lucrative.
Naturally, the sharp selloff in August led to a fairly long period of consolidation. The current 2015 low at 87.33 forms the base of a wedge pattern that illustrates the indecision between buyers and sellers.
This gives us a well-defined level from which we can take advantage of any further weakness. That said, because this level is being respected on a daily closing basis, it’s important to wait for a close below the key level before considering an entry.
Once below the wedge floor, key support comes in at 89 and 87.33. Only a close above resistance near 93.30 would negate the bearish bias.