Since oil prices seem to have bottomed out, I’m shifting to a long bias for the Canadian dollar. What do you think of this triangle forex setup on CAD/JPY?
As you can see from the chart below, the pair formed higher lows on its 1-hour forex time frame and found resistance at the 92.00 major psychological mark. Price already bounced off the triangle support and might test the top once more.
As Forex Gump mentioned in one of his earlier articles, there are several market factors keeping crude oil supported right now, boosting the positively-correlated Loonie as well. In contrast, the Japanese yen is looking weak, thanks to the slight pickup in risk appetite and the dovish bias shared by one of the BOJ officials last week.
I haven’t set any orders yet since I’m expecting a bit more volatility during the BOJ press conference today. A downbeat announcement focusing mostly on the risks stemming from China could send CAD/JPY past the triangle resistance, pushing the price up by an additional 400 pips or the same height as the forex chart formation. On the other hand, words of reassurance from BOJ Governor Kuroda could renew demand for the yen and trigger a downside break.
Later on this week, Canada will print its manufacturing sales and foreign securities purchases report, followed by the CPI readings on Friday. I guess I’ll have to wait for more clues from these economic reports to figure out where CAD/JPY might be headed next, but I’m definitely keeping this pair on my watch list of setups!
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