CAD/JPY Downtrend to Resume at 94.00? – Apparently Not!

Trade Update: 2013-10-16 5:17

Dang! CAD/JPY busted out of the trend line and broke past 95.00 when risk-taking started! Good thing I decided to exit early and cut losses.

As I mentioned on Twitter last week, I heard some rumors that Washington was starting to reach a compromise on the budget and that a deal would be announced soon. Although this turned out to be untrue, traders’ hopes that the U.S. government shutdown was about to end was enough to spark a risk rally that day.

cadjpy

Because of that, I decided to close my trade once I saw the pair breaking through the trend line a little above the 94.00 handle. I was able to close around 94.20 for an average of -27.5 pips in losses.

I think it was a pretty good decision considering I was banking on a continued risk-off environment to keep CAD/JPY in a downtrend. Once that idea was invalidated, I was able to make adjustments quickly and not hesitate to reduce my exposure. What do you guys think?

Trade Idea: 2013-10-09 4:34

How’s it going, comdoll buddies? I’ve decided to join the risk off bandwagon by shorting CAD/JPY! Here are a few more reasons why I picked this pair in particular:

As you can see on the pair’s 1-hour time frame, there’s a falling trend line connecting the recent highs. I’m hoping to enter on a pullback to that resistance level, possibly around the 94.00 major psychological mark. Oh, and did I mention that 94.00 used to be a former support level?

cadjpy

On the fundamental side of things, I’ve been seeing a lot of weak reports from Canada lately, most notably the building permits and trade balance released this week. Building permits slipped by a whopping 21.2% while Canada printed a wider trade deficit of 1.3 billion CAD for August. To make things worse, the July figure was revised from -0.9 billion CAD to -1.2 billion CAD!

The Japanese yen, on the other hand, still seems to be supported by the risk off market environment. After all, the U.S. government is in shutdown mode and traders aren’t showin’ any lovin’ for the dollar at the moment. That leaves the yen as the better lower-yielding alternative!

I did see a couple of reversal candles near 94.00 so I decided to enter half my usual position size at market and set a sell limit order exactly at 94.00. As I’ve learned from my Q3 Review, I should set wider stops for more volatile yen pairs and take the trade time frame into account, so I think a 100-pip stop should be just right. This should also give me enough time to consider exiting my trade early if the trend line breaks.

To sum up, here are my trade details:

Short CAD/JPY at market (93.85) and at 94.00, 0.25% risk for each position. Stop loss at 95.00 and profit target at 92.50.

I’m aiming for the 92.50 mark because it’s the next established support zone, which can be seen more clearly on the 4-hour time frame. That should give me a 1.5-to-1 return on risk for this setup and if you plan to tag along, make sure you look at our risk disclosure first!

Do you think I can win this one? Keep those comments comin’!

Happy time

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What is the STA strategy? Q2 2013 in Review Comdoll Trading Kit USD/CAD Trade

  • I REALLY like this setup Happy Pip!! 🙂 May the pipping commence!!

    • Happy Pip

      Too bad it didn’t work out though. The technical setup looked solid but I guess market sentiment just wasn’t in its favor. Did you take this one too?

      • No, I didn’t take it. Are you looking at anything specific now for this week?

        • Happy Pip

          So far, none yet. I think I might just wait for the U.S. budget/debt situation to play out then take it from there. Too much uncertainty these days!

          • I hear you. Hopefully the get it over with soon…

  • Orchid

    I see both RSI and MACD Divergence in 93.30 and 93.41 lows and downtrend may not continue although we may have a pullback from 94 but i think it will not touch 93.50 again and your target “92.5” may not be reached i think you better wait for pullback and close your position this is my opinion Good Luck!

    • Happy Pip

      Looks like you were right about this one! The pair did drop to the previous lows but the selloff was not sustained. I probably should’ve closed early around the 93.50 area. Thanks for pointing it out though!

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