Short term
Trade view / 20 July 2016 at 11:47 GMT

CADJPY in pennant race

FX Consultant / IFXA Ltd

The CADJPY rally that was intact since last week ended on Friday with a move below 81.85. But the subsequent decline was shallow, and CADJPY has languished for the past three days within an 81.00-82.13 range.
The 4-hour chart shows a clearly defined pennant, which suggests that a break above 81.85 would extend gains toward the mid-June peak.

Japan is widely expected to embark on another round of stimulus next Thursday, which is driving the USDJPY and CADJPY gains. Since the degree of stimulus is unknown, there is plenty of room for further upside, while limiting downside moves.

Management and risk description

This CADJPY idea could turn toxic if oil prices fall below $44.00/barrel, which would boost USDCAD and trigger the stop loss. It is also vulnerable to a shift to risk-averse trading, which would lead to USDJPY selling and trigger the stop. Weaker-than-expected Canadian economic data on Friday would also be problematic.


Buy: 1/2 position of CADJPY at market (81.62), balance at 81.12

Stop: 80.62

Target: 84.50

Time horizon: 8 days

CADJPY 30-minute chart with second buy level and stop-loss level shown
Source: Saxo Bank

CADJPY 4-hour chart showing pennant and take-profit level
cadjpy Source: Saxo Bank 

CADJPY 5-year daily chart with moving averages
cadjpy Source: Saxo Bank 

— Edited by John Acher

Non-independent investment research disclaimer applies. Read more
20 July
assi assi
Hi Michael, can you advice about USDJPY and EURJPY..? thanks
20 July
Michael O'Neill Michael O'Neill
Sorry, Assi, I don't have a strong opinion on either cross
21 July
Estuardorlemus Estuardorlemus
Hi Mike, you think the JPY retreat is enough to take CADJPY to 80.00 level ?


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