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The Yen pairs have slowly started to fall off over the past several weeks. It started with the EURJPY in late February. Then came GBPJPY and NZDJPY late last week. Last but not least, AUDJPY saw a 120 pip decline yesterday. This was also a pair that I highlighted in the recent weekly Forex forecast.
So is CADJPY next?
I think so given yesterday’s price action. But before we get into that, let’s rewind back to when this pattern really started.
CADJPY experienced an aggressive rally between October and November of last year, gaining a staggering 1,300 pips in seven short weeks. However that rally was short lived as the pair gave all of those gains back and more over the next seven weeks.
Since early February, the market has been consolidating into a rising wedge pattern. Patterns such as this often signal a continuation of the broader trend.
Yesterday’s bearish price action was able to break this pattern with a 4 hour and daily close below wedge support. In the process of breaking the level, the pair formed a bearish engulfing bar on the daily chart, giving further conviction that a move lower is likely.
CADJPY daily chart:
This bearish engulfing bar combined with a break of key support leaves us looking lower. At this point I think a retest of the 2015 low may be in order at 91.72. However another level to keep an eye on is the 94.25 handle, which has acted as support and resistance since 1998.
Summary: Potential to sell the pair on a retest of the 95.60 region. Key support comes in at 94.25 and 91.72.