Over the weekend I mentioned the large reversal pattern that looks to be unfolding on CADJPY. The price structure that has been developing since early 2013 is reminiscent of a head and shoulders pattern that could lead to a much bigger correction for the pair.
In the weekend commentary I mentioned that traders could watch for bearish price action on a retest of the neckline as new resistance. However judging by yesterday’s session, I’m less optimistic that we will get that second retest.
Yesterday’s close below 91.50 could bring further weakness as long as sellers can hold prices below this level on a closing basis. The 91.50 handle has played a role since August but can also be seen influencing price between January and March of 2013.
From here traders can watch for selling opportunities while the pair holds below 91.50 on a closing basis. Any daily close back above this level would negate the bearish bias and expose former neckline support near 93.30.
Summary: Watch for a selling opportunity while below 91.50 on a closing basis. Key support comes in at 89 and 87.30. Alternatively, a daily close back above 91.50 would negate the bearish bias and expose former neckline support.