CADJPY found resistance at a familiar level during yesterday’s session. The neckline of the massive thirty five-month reversal pattern has now capped two attempted rallies since the pair broke below the level on August 21st.
Although the left shoulder of the pattern is elongated, the technical implications of the price structure are hard to ignore given the vast amount of room to the downside.
Since the break on August 21st, it has been a tug of war match between the bulls and the bears as neither side has managed to take control. We can now see that a wedge pattern has emerged as a result of this consolidation.
Often viewed as a continuation pattern, the wedge that has formed on CADJPY extends off of the August low with both support and resistance having been tested on multiple occasions.
Yesterday’s retest of former neckline support formed a bearish pin bar, indicating that lower prices are likely in the coming sessions.
That said, anyone trading this signal should know that a move lower may not garner much follow-through, at least not while above wedge support. Only a break below support would signal that the consolidation period is coming to an end, which could trigger the next (major) leg lower.