Forex Trade Ideas: CAD/JPY or USD/CAD?

Help! I’m confused! I’m seeing neat technical forex setups on a couple of Loonie pairs, but I can’t figure out which one makes more fundamental sense. Care to share your thoughts?

First up, I’ve had this long CAD/JPY trade idea, based mostly on improving Canadian economic data and a potential tightening bias from the BOJ. However, current market sentiment doesn’t appear to support a long forex trade since the lower-yielding yen is able to take advantage of the risk-off environment.

The technicals are still looking pretty solid, as the pair is stalling right at my entry area while a bullish divergence can be seen.

CAD/JPY Daily Forex Chart

CAD/JPY Daily Forex Chart

Today’s Chart Art from Big Pippin had an interesting USD/CAD forex setup that caught my eye though, as a short-term trend retracement appears to be taking place. As you can see from the chart below, the pair is pulling back to the 1.1200 area, which lines up with the 61.8% Fib level and the rising trend line. To top it off, a bullish divergence can also be seen!

USD/CAD 1-hour Forex Chart

USD/CAD 1-hour Forex Chart


On the one hand, I’m getting more and more convinced that risk aversion might be here to stay, as another global economic slowdown is likely to take place. This should favor the safe-haven U.S. dollar, but the change in FOMC bias and the disappointing U.S. retail sales release could the Greenback weak for now.

Which setup do you think has a better chance of turning out a winner? I could really use your feedback on this!


Happy time

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  • ForExchange

    Hi HappyPip,

    it was one of those few days yesterday when my bias changed. Once, I am not bullish anymore on GBP, and also I am not so sure about USD.

    So the questions you raised are very good. Yesterday as I wrote in your other post, I was sure the CAD/JPY setup looks good. It still looks good, still I closed my JPY trades for now and will also not enter new ones. As you said it is risk aversion and who knows how long this sentiment stays. It looks gambling to me.

    On the other side USD weakens too, but I think it is still a good trade vs. the CAD. If US has bad reports, most likely CAD will follow. More than that, I think the falling oil prices will soon hit CAD. It has to come at one point.

    Last but not least, if you want a longer-term trade, I do see quite good setups against the CAD. Check the daily AUD and NZD TF vs. CAD.


    • Glad to know I’m not the only one changing my mind about some currency biases! I’m thinking that risk aversion could keep USD supported, along with relatively better growth prospects, but I also believe the recent switch in FOMC bias might keep it weak for the time being. Thanks for reminding me to check other comdoll crosses, might have better luck finding good setups there.

      See you around, ForExchange! As always, I really appreciate the feedback 🙂

  • Alejo

    I think that USD/CAD has more fundamental issues, than the CAD/JPY setup. The U.S. growth will continue.

    Regards from Santiago, Chile!

    • Thanks for checking out my blog and taking time to share your thoughts. I’m also inclined to think that the U.S. growth will continue, just probably hitting some speed bumps at the moment. Waiting for signs of a bounce on CAD/JPY for now though!

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