Solid trend higher on CAD/JPY over the past few week, but now finding some resistance and consolidating. Breakout ahead?
CAD/JPY Upside Breakout Ahead?
The Canadian has had a few solid weeks of gains over the past month, likely due to the positive sentiment on the U.S.-China trade story and a little bit of help from the big rally in oil since the start of the year. That theme of improving U.S.-China trade relations is likely going to end up with a trade deal, especially if the U.S. decides not to stick with the March 1 trade deadline as U.S. President Donald Trump hinted today.
So, I think there is fundamental backing for global risk sentiment to keep leaning positive, which is likely to keep CAD/JPY moving higher, especially after BOJ Governor Kuroda says that the BOJ could ease further if the yen strengthens. Basically that means there’s a cap on yen strength, so its not likely a long position traders are willing to take at this time.
On the four hour chart above, we can see the pair trending higher since the beginning of the year, but sellers are holding firm around the 84.00 handle. I’m looking to put a nibbler order on a break of that resistance to start, and as we get more Canadian and Japanese data over the next couple of weeks, I’ll plan out building up the position if it still makes sense.
My stop will be below the rising lows at around two weekly ATR, and since I plan on holding this for a while if the fundies let me, I’m going for a longer-term target of the 2017 and 2018 highs. Here’s what I’m doing:
Long half position CAD/JPY at 84.05, max stop at 82.15, max target at 91.00
I’ll be risking only 0.50% of my account and my potential max return-on-risk is about 3.65:1 for now. Of course, I’ll look to add further to the position or adjust quickly (i.e., cancel orders, close trade, reverse trade) depending on the U.S.-China trade story unfolds, any significant changes to CA or JP’s fundies, and/or global risk sentiment has a big shift negative. I may also consider buying if the next move is to the downside, but I’ll have to re-assess the situation before putting up orders.
Stay tuned and as always, remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t simply follow what I do.
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