So far so good on my CAD/JPY trade! I was able to get in after the neckline breakdown at the start of this week, and fundamentals are still looking good for this short setup.
In my trade update blog post last week, I mentioned that I had a short bias on this pair but that I was feeling iffy about setting orders right before Trump’s inauguration. But when the new U.S. President focused on his protectionist plans during his speech, market watchers started speculating that this can’t bode well for Canada’s exports.
The Loonie was also dragged down by downbeat economic data, as Canada’s headline retail sales and CPI came in below consensus. This underscores the Bank of Canada’s view that the economy isn’t really that strong and that underlying inflationary pressures aren’t exactly indicating a pickup yet. BOC Governor Poloz also mentioned additional headwinds coming from the Trump administration as well.
On the flip side, the Japanese yen seems to be the biggest beneficiary of risk-off flows from global trade jitters. Not only did Trump sign an executive order quitting the TPP during his first day in office, but he also said that he plans on renegotiating NAFTA with the leaders of Canada and Mexico pronto. Aside from that, his Treasury Secretary nominee has spoken about investigating China’s currency manipulation tactics, triggering a flight to safety during the Asian session.
I was able to get in at 85.50 on Monday with a stop just above the 88.00 major psychological level. I’ll be aiming for last year’s lows near the 76.00 handle as my ultimate profit target but I’ll roll my stop to entry once price heads 250 pips lower, which is roughly the same height as the double top formation. I’ll also consider booking some profits if the pair finds a floor around the 80.00 mark. Here’s what I have:
Shorted CAD/JPY at market (85.50), stop loss at 88.25, profit target at 76.25. I’ve risked 0.5% of my account on this swing setup for a 3.4-to-1 R:R. Don’t forget to check out our risk disclosure if you’re trading this one, too!
See also: Q4 2016 Trading Performance Review
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