I’m still keeping an eye out for this CAD/JPY descending channel, trying to decide if I should short again at a better price when it tests the resistance. Care to help me out?
CAD/JPY Trade Setup
The pair has been moving in a descending channel on its 4-hour time frame and is gearing up to test the resistance just slightly above the 87.00 major psychological level. Stochastic is already indicating overbought conditions and may be ready to turn lower, allowing the ceiling to hold and Loonie bears to regain control of price action. If so, CAD/JPY could make its way back to the channel support near the 84.00 mark.
I haven’t set any entry orders yet since I’m still a tad worried about fundamentals. So far, updates from the OPEC have indicated that member nations are complying with the output cuts and projections show that these are likely to have a material impact on oil supply in the coming months, putting additional upside pressure on prices. To top it off, the meeting between Trump and Trudeau seems to have concluded on a positive note, with both leaders committing to strengthen economic ties.
Then again, the reduction in OPEC output could be outweighed by the pickup in U.S. production. Apart from that, the demand side of the equation isn’t looking too good, as India reported that fuel consumption slumped by 7.8% in January – its sharpest fall in 13 years. Still, this could be a one-off factor as the drop was mostly spurred by the government’s crackdown on high-value currency notes.
As for the Japanese yen, the lower-yielding currency has been on the back foot against the commodity currencies lately as risk appetite has been improving. With that, I’m also staying on the lookout for a breakout long opportunity past the 87.50 mark. I’ll keep y’all posted if I decide to take a position on CAD/JPY.
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See also: Q4 2016 Trading Performance Review
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