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Big swing move from CAD/JPY in June, going from a low 81.00 handle to nearly reaching 87.00 after breaking out of a consolidation range. Is this the beginning of a bigger move higher?

CAD/JPY Long Setup

CAD/JPY 4-Hour
CAD/JPY 4-Hour

I’ve been bullish on the Loonie for a couple of weeks now, first expressing it with my short AUD/CAD idea (which is still open), and now with this long idea on CAD/JPY.  The hawkish vibes from the Bank of Canada that seems to have sparked this bull move seems to still be in play, especially with recent comments from the BOC reinforces that sentiment that a hiking bias is a possibility given recent economic strength.

On the other side of the pair, I think the Bank of Japan’s lack of rhetoric to reduce its easing program despite economic improvements is likely still hurting the yen, sentiment that I don’t think will change until we get fresh data in July. Both central banks do have monetary policy meetings in July and based on the recent data, I don’t think the rhetoric will change, so the odds are CAD/JPY sentiment will stay in bull mode for now.

From a price action standpoint, the bullish sentiment helped CAD/JPY break above a range between 81.00 to 84.00 that has been going on since the end of March, which I think could attract more buyers as long as the current themes hold. But with such a strong move higher, I’m more inclined to wait for a pullback to around the broken swing high before entering with a long position, and my stop will be my usual one weekly from the entry point.  Here’s what I’m doing:

Long half position CAD/JPY at 84.50, max stop loss at 83.10, initial target at 87.00 for a 1.07:1 return-on-risk potential.

I’ll be risking only 0.5% of my account on this position and I may potentially try to maximize my gain depending on what the market stories are if I’m triggered and 87.00 is tested.  Stay tuned!

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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