CADJPY: Bearish Momentum Picks Up as Correction Continues
The daily candle chart below shows the price history of the Canadian Dollar (CAD) versus the Japanese Yen (JPY), over the medium term. This currency pair is known as CADJPY, and is trading around 93.10 around time of publication today.
Since failing to hold above 96.00 earlier last month, the CADJPY has been on a bearish trajectory finding support initially at the 38.2% Fibonacci retracement level through the second half of last month before trading down towards current levels and reaching near the 23.6% Fib-level late last week. This resistance level was similar to the resistance encountered last year when this pair was last reviewed the Ideas You Can Trade series.
Support may exist near 92.50 - which could be the next stop for CADJPY as the pullback appears to have steepened, and with further support much lower near 91.00 near the 0% fib-level which could be reached by the end of the month based on the current bearish trend line path (point 2 in magenta color on chart).
A reversal of the bearish momentum could follow even near current levels as a bearish resistance line reached (white dotted line on chart) could provide support, although the medium term bearish resistance line (point 3 in yellow on chart) just above it would also need to be overcome in order for a sustained bullish reversal to follow.
Below are examples of how to trade a bearish continuation or a bullish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 93.48 with a Limit to take profit @ 93.81 and a stop-loss @ 93.18 Risk/Reward Summary: Limit risk = +33 pips profit / (-30) Stop-loss risk = Gain to Loss ratio = 1.10
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 92.67 with a Limit to take profit @ 92.23 and a stop-loss @ 93.01 Risk/Reward Summary: Limit risk = +44 pips profit / (-34) Stop-loss risk = Gain to Loss Ratio = 1.29
Medium Term Daily Candle Chart: