Thanks to the relatively downbeat BOC monetary policy statement, I’m thinking of taking another short Loonie forex setup. I’ve already got my eyes locked on a long-term NZD/CAD reversal play but I’m still having second thoughts because of the disappointing dairy trade auction. For now, I’m considering taking this shorter-term CAD/JPY play.
As you can see from the 4-hour forex chart below, the pair already broke below the neckline of the head and shoulders pattern, indicating that further losses are likely. Fundamentals support this since the BOC decided to lower their growth forecasts for the next couple of years, even though they still kept monetary policy unchanged.
With that, the pair is now back inside its previous range, which is around 250 pips in height. CAD/JPY still has around a couple of hundred pips to go before hitting the floor!
Stochastic has just reached the oversold area, though, so sellers might be looking to book their profits off their recent short positions soon. However, London session forex traders have yet to react to the pessimistic BOC statement, which means that there may be a bit more bearish momentum left.
Think I should go short at market or wait for a pullback to the broken neckline around 91.80 to 92.00?
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