Trade view /
14 September 2016 at 12:35 GMT
The CADJPY downtrend intact since April 26 was broken at the beginning of September with the move above 78.85. That rally was capped at 80.30 and since then CADJPY has declined steadily to 77.50, just above the bottom of 77.30 which survived numerous probes since August 8.
The intraday downtrend was broken yesterday with the move above both 77.90 and 78.15.
Yesterday’s Nikkei Asia Review report that the Bank of Japan would make its negative interest rate policy the centrepiece of future monetary expansion has raised expectations for another round of stimulus from the BoJ at its September meeting. That should support USDJPY.
Oil price movements have dominated USDCAD trading but as long as WTI remains above $42.30/barrel, USDCAD gains will be limited. The Bank of Canada may have delivered a slightly dovish policy statement, but Canadian interest rates aren’t going anywhere.
Stable oil prices and the risk of additional easing from the BoJ should lead to an attempt by CADJPY to pop the cap.
Management and risk description
This trade is fraught with risks including another bout of risk-aversion trading which would trigger the stop-loss. It is also vulnerable to renewed oil price weakness below the uptrend line.
CADJPY 30-minute with break of downtrend lines and second buy level shown
CADJPY four-hour highlighting stop-loss and take-profit:
CADJPY 5 year daily with moving averages:
Source: Saxo Bank
Entry: buy ½ CADJPY at market (77.95) balance at 77.55
Time horizon: seven days.
— Edited by Michael McKenna
For more on forex click here
Non-independent investment research disclaimer applies. Read more