Looking for oil-related trades today?
Crude oil has taken a chill pill from its sharp uptrends.
Will oil weakness lead to CAD/JPY reversing from its March highs?
CAD has had a very good week against JPY, gaining about 300 pips from last week when CAD/JPY touched 2022’s lows near 89.50.
However, buyers had trouble extending CAD/JPY’s gains beyond 92.50 and now the pair is sporting a Head and Shoulders pattern on the 1-hour time frame.
The risk environment isn’t looking good for high-yielding comdolls either.
China reporting a spike in COVID cases and implementing partial lockdowns in key manufacturing hubs has highlighted global growth concerns as well as future demand challenges for crude oil (one of Canada’s biggest exports). Already the People’s Bank of China (PBoC) has injected an additional 100 billion yuan into the financial system to help boost liquidity.Even war optimism is taking a hit as the U.S. White House shared its “deep concerns” that China could help Russia and further escalate military tensions in the region.
Last but not least is the Fed’s expected interest rate hike later this week, which could derail Uncle Sam’s economic recovery.
An anti-risk trading environment could drag CAD/JPY below its Head and Shoulders “neckline” and down to the 91.00 inflection point.
A stop just above March’s highs and a target near the 100 SMA support would yield at least a 2:1 risk ratio.
I wouldn’t rule out a bounce from the neckline though. Escalation of military tensions in Ukraine or the FOMC policy decision pushing USD/JPY and the rest of the yen crosses higher could boost CAD/JPY to new March highs.
Whichever bias you choose to trade, make sure to have a trading plan and to stick to it!
This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.