This article is Part 1 of a series.
CAD/JPY is back to retesting the top of a range that goes back to early March. Is it time for the bears to step in once again? What catalysts are ahead potential get the bulls to finally break out? Well, let’s check it out!
CAD/JPY Range Resistance?
As mentioned above, the market is retesting a major resistance area around the 78.00 major psychological handle. This turned the bulls back twice in the last month, so the question now is will the bears take control once again?
Well, we just got a terrible PMI up from Canada to likely bring in some Loonie sellers out, but traders are likely waiting for the upcoming OPEC meeting and Canadian jobs update before making real moves.
The Canadian jobs update is already expected to be terrible, so it’s not likely to be a driver for the Loonie unless we get a big surprise from an expected 400K net job loss.
As far as the OPEC meeting on whether they will cut oil production, the odds at the moment are that Russia and Saudi Arabia will likely come to a deal if the U.S. joins along, but with a long list of potential complications to lead to a breakdown in talks, I’m leaning more to the potential “no deal” outcome for this week. If so, we’re likely to see oil drop on this scenario and likely take the Loonie down with it.
With my odds leaning more for a no-deal OPEC outcome, I’m looking to short CAD/JPY to play my short Loonie bias and potential reversal at the top of a range. But I’m keeping this trade very low risk (i.e., small position & wide stop) since this is pretty much a news play.
My stop will be a little more than the daily ATR of around 150 pips, and my max target will be the bottom of the range for a pretty strong short-term return-on-risk. Here’s what I’m going to do for now:
Short half position CAD/JPY at market (77.77), max stop at 79.75 with 0.50% risk, max target at 75.05
I’ll be risking 0.50% of my account with a rough potential 1.30:1 return-on-risk. This is a short-term trade, so I do look to trade out of this position manually if it goes against me or lacks downside momentum. If the market does go my way, they I’ll reassess to potentially turn this into a longer-term swing play depending on the driving themes and outlook.
That’s it for now. Stay tuned for updates 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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Read more about this trade idea's development over time.
CAD/JPY is back to retesting the top of a range that goes back to early March. Is it time for the bears to step in once again?
Here’s a quick adjustment on my CAD/JPY short trade to reduce risk and lock in a profit ahead of potential technical obstacle for the bears. Check it out!
Time to re-visit my two open plays in GBP/USD and CAD/JPY to make adjustments to the recent news and shifts in broad risk sentiment and FX biases.
After adjusting my trade plan on CAD/JPY, the pair spiked higher before the end of last week and triggered my tight stop to close me out for a small gain.