CAD/JPY has been grinding lower in a descending channel for the past two years, but there may be a chance the bulls are ready to take back control. Is the trend about to change?
Long-term Trend Change in CAD/JPY?
We’ve got a potential setup in the works for longer-term players out there, this time on CAD/JPY’s weekly chart.
We can see the pair has created a solid descending channeling pattern, going back to the beginning of 2018 where it topped out at 90.00.
Last year, the pair bottomed out around the 74.00 handle before rallying with all other risk assets after the world was flushed with liquidity, a move by the world’s central banks to support flailing economies due to the pandemic in 2020.
That pair is now back to a strong area of interest (the 81.50 area has served as both support and resistance area) and the top of the descending channel pattern. And it looks like we’re not getting the resistance that we’ve seen in the past as the pair holds above the 82.00 major psychological handle and falling ‘highs’ pattern.
So, is this the beginning of a new trend higher? Well, with expectations of a recovery due to vaccine distributions around the world, Canada is expected to bounce back, as well as oil demand (Canada’s biggest export). And the conviction is enough that the Bank of Canada recently stated that it is unlikely we’ll see further stimulus moves for now.
Overall, the odds are in favor of CAD/JPY grinding higher (especially if this week’s Canadian employment update surprises positive), but there is a risk down the road to a bullish view that the new coronavirus variants could be a problem that sparks restrictions once again.
What do you all think? Are you watching CAD/JPY for a potential longer-term position trade? If so, what’s your directional bias and entry strategy? Let me know in the comments section below!
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