CAD/JPY takes a dive in the last week, but stalls at minor technical area. Will the momentum continue or are bulls ready to take back control?
Downside Momentum in CAD/JPY
Checking out CAD/JPY for a short term play as the recent halt in the downside momentum could be another opportunity to get in short.
On the four hour chart above, we can see that CAD/JPY turned lower quickly, likely on a the Coronavirus outbreak fears sparking global risk-off sentiment (usually a positive environment for the Japanese yen), which also sparks speculation this situation will reduce oil demand, which happens to be Canada’s top export. After topping out around 84.50 in mid-January, the pair is now currently consolidating between 82.50 – 83.00.
With the strong support area around 83.00 broken, retested and reversing back lower, I think that’s a signal that bears could take control again. So, I’m going to play the current main market theme of risk-off sentiment/oil demand weakness through CAD/JPY by going in at market with a small position. My stop will be above the broken support area, while my target will be the next major support area last seen back in December. Here’s what I’m going to do:
Short half position at market (82.58), max stop at 83.35 with 0.50% risk, max target at 81.65
I’m only risking 0.50% of my account on this trade and I’ve got max potential return-on-risk of around 1.20:1. It’s likely though I’ll trade out of this position manually this week, depending on how global risk sentiment develops, or if we get a much better-than-expected Canadian GDP read on Friday.
What do you guys think? Are you watching CAD/JPY for a potential short position as well? Let me know in the comments section below!
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