Double Bottom on CADJPY? – Trade Closed

Trade Closed: 2010-10-18 1:59

CADJPY chart

Ouch! My account took another hit as CAD/JPY kept sliding down last week. Apparently, I got faked out by those deceiving double bottoms!

Strong economic data from Canada couldn’t save the Loonie’s day as the yen continued to rally on Thursday and Friday. Trade balance figures came in better than expected, printing a much smaller deficit of 1.5 billion CAD. Meanwhile, manufacturing sales came in strong and posted a 2.0% increase for August.

I wonder what’s happening now. Is risk aversion back in the game? Are traders no longer hesitant to buy up the yen, knowing that the BOJ could step up its intervention efforts once more? I do hope I could figure it all out really soon because I plan on bouncing back this week!

Anyway, here’s the damage:
P/L: -50 pips / -1.0%

Trade Idea: 2010-10-14 2:54

CADJPY chart

I think I’m ready for another serving of CAD/JPY! After getting burned the last time I traded this pair, I’m taking another shot at going long!

My geeky forex friends told me over a tub of sweet strawberry sundae that the Loonie has been rockin’ against its US counterpart lately, with speculations of another QE in the US and the positive house price index from Canada pushing USD/CAD near parity. With the Canadian trade balance just around the corner, I’m thinking there’ll be another report to boost the Loonie’s spirits today. After all, their trade deficit is expected to narrow from 2.7 billion CAD to 2.2 billion CAD.

I also heard that USD/JPY has been skirting around levels not seen since Casper showed up in the blockbuster scene 15 years ago. I don’t know about you, but something tells me that the BOJ won’t take the yen’s rapid appreciation meekly! If the BOJ would intervene in the currency markets yet again, then we just might see the pair rise like a fluffy soufflĂ© all the way above its previous highs! Hmm… fluffy soufflĂ©… Me likey!

Looking at the 1-hour chart, I spotted a double bottom formation and a breakout from the neckline. Now, I’ve seen this pattern before and I noticed that the price usually pauses to retest the neckline before continuing on the uptrend. Let’s see if that’ll be the case again with CADJPY.

When I drew up my Fibs on the recent upswing, I noticed that the 38.2% retracement level lines up with a former resistance level. Could it switch gears and turn into a support level, perhaps? I do hope so!

Here’s what I did:

Long CADJPY at market (81.15), stop at 80.65, profit target at 82.20. As usual, I risked 1% of my account on this trade.

Wish me luck everyone!