CAD/JPY Ranges To Resistance at 78.80

The CAD/JPY continues to be one of the Forex markets strongest trending currency pairs moving down 1,169 pips from its April 8th high at 88.47 to this month’s low at 76.78. The pair’s descent has currently moved into a wedge pattern, consolidating prior to an attempt at lower lows. This sideways action against support allows traders ample time to find trending opportunities.

The Canadian dollar has not just been week against the Yen. The CAD has shown weakness against most major currencies. Fundamentally the currency has weakened with the easing of oil prices as discussed in, USOil Poised to continue 34% Sell-Off . As well, disappointing news such as Canadian Retail sales (Less Auto) , continue to point to a slowdown in their economy. As the economic outlook for Canada dims, so does our outlook for the currency.

Price Action

Taking price in to a 4Hour chart we can see the CAD/JPY pair trading in a well defined range. Resistance is standing at yesterdays high at 78.78. Support is defined by multiple candlewicks and testing as low as 76.78 on August 11th. With this in mind traders can look for trades in the confines of the range, with the direction of the daily trend. Ranges are also seen as a precursor to a breakout and emphasis should be put on stop placement.

Trading Opportunity

My preference is to sell the CAD/JPY on a turn of CCI under +100. Sell orders should be placed at resistance near 78.80. Stops should risk 80 pips to 79.60, which is 50% of our previous range. Limits will rest at 77.00 for a clear 1:2 risk reward ratio.

Alternative scenarios include price continuing breaking out to new highs.

Walker England contributes to the Instructor Trading Tips articles. To receive more timely notifications on his reports, email instructor@dailyfx.com to be added to the distribution list.