The yen is kicking pip butts today!
Forex price action has been relatively muted in the last trading sessions as traders wait for closely watched reports like the U.S. CPI and BOE’s policy decision.
The Canadian dollar has lost some pips, however, thanks to a bit of profit-taking and crude oil – one of Canada’s biggest exports – slipping after China’s disappointing trade data sparked concerns for global economic recovery.
Meanwhile, the Japanese yen is gaining ground after BOJ Governor Ueda shared that he plans to scrap the central bank’s Yield Curve Control (YCC) program as soon as the members see sustained signs of inflation hitting their targets.
CAD/JPY is trading close to its weekly open price after hitting highs near the 101.35 handle that aligns with the R1 of today’s Standard Pivot Point.
More importantly, the pair is forming what looks like a Head and Shoulders pattern in the 15-minute time frame.
Will we see a short-term reversal today?
Aside from the rejection at R1, CAD/JPY’s failure to break past the 101.35 zone also meant that the 101.40 area of interest in early May held as resistance for another day.I wouldn’t discount a continuation of Friday’s upswing though.
For one thing, CAD/JPY is close to the 200 SMA which lines up with today’s S1 (100.60). Not only that but CAD/JPY is also sporting a bullish divergence on the chart.
Unless we see catalysts that might push risk assets higher, I’m betting on JPY seeing some more gains and CAD being weighed by lower crude oil prices.
I’ll be waiting for a clear break below the 101.60 support before aiming for areas of interest like 100.25.
In the event that we don’t see market-moving catalysts, then CAD/JPY could maintain its current range.
The pair could bounce from its three-day support level near 100.70 and retest previous inflection points near 101.40.
Whichever direction you choose to trade, make sure that you know CAD/JPY’s average daily volatility and that you’re practicing your best risk management moves!
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