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I’m getting ready to short the Loonie in case the OPEC announces big output deal changes, and these CAD/JPY formations are looking sweet!

Short CAD/JPY Idea

As Cyclopip shared in his Weekly Crosses Watch, a head and shoulders pattern has formed on the 4-hour chart of this pair and the neckline test is already taking place.

CAD/JPY 4-hour Forex Chart
CAD/JPY 4-hour Forex Chart

I’m hoping to be able to catch a move below this neckline as confirmation that the pair could drop by roughly 400 pips or the same height as the chart pattern. However, I’m not gonna set sell stop orders yet since I’m anticipating choppy price action during the OPEC meetings.

Besides, this pair has another head and shoulders formation brewing on the daily time frame and this could have plenty of room to slide.

CAD/JPY Daily Forex Chart
CAD/JPY Daily Forex Chart

Word on Wall Street is that the cartel could discuss increasing production caps by 300K to 600K barrels per day, although some OPEC members like Iran and Iraq might oppose this.

Another factor that might keep a lid on crude oil gains is the escalating trade war between the U.S. and China, as this could ultimately dampen business sentiment enough to weigh on demand for energy commodities. On the flip side, this could prove bullish for the lower-yielding yen, particularly if investors also steer clear of the dollar.

For now, I’m keeping an eye on the 83.00 mark and would likely try to hop in on a strong break below that support. From there, I’ll initially aim for the next support around 80.50 then wait to see if the longer-term pattern’s neckline breaks.

As for my stop, I plan on setting it past the short-term shoulders around 85.50. This should be enough to give me roughly a 1:1 return-on-risk with my initial target. What do you guys think?

Happy

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