I’m starting this brand-new month with a neat technical setup on CAD/JPY. It looks like most yen pairs are on a solid downtrend lately so I’m inclined to go with the flow on this one.
CAD/JPY Trade Idea
I already had my one good eye on this pair when it tested the channel resistance at the 87.00 major psychological level in early February, but I chickened out from shorting since there were a bunch of factors suggesting further Loonie gains at that time. As it turned out, a few disappointing reports from Canada coupled with risk-off vibes dragged CAD/JPY back to the channel support, which seems to be keeping losses in check for now.
I’m not too sure about going long at this point, though, since traders seem to be bracing themselves for a downbeat BOC statement later on this week. Even though underlying inflation reports from Canada showed some green shoots and an OPEC report confirmed that cartel members were able to achieve most of their output cut goals, the Canadian dollar tanked across the board in the latest U.S. session.
With that, I’m gonna stay patient and wait for a pullback to the channel resistance around 86.00-86.50 and the area of interest at the 61.8% Fib to catch a short position. After all, the trend should be my friend, right?
I’ll also be on the lookout for a short opportunity at the mid-channel area of interest at 85.50 or the 38.2% Fibonacci retracement level in case Loonie bears seem eager to hop right back in and push for a steeper drop. Data from Japan has been somewhat upbeat so far, with retail sales, housing starts, and capital spending all coming in higher than consensus.
For now, I’m just waiting to hear what U.S. President Donald Trump has in mind when it comes to infrastructure and security spending as U.S. fiscal stimulus plans could also have a strong impact on the dollar’s safe-haven rivals like the yen. I’m also gonna sit on my hands until the actual BOC statement is over to figure out if I need to make adjustments to my fundamental bias.
I’ll keep y’all posted on my exact entry levels if I do decide to hop in. As always, don’t risk more than 1% of your account on a single trade and make sure you read our risk disclosure if you’re thinking of taking the same setups.
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