Brief Look At CAD JPY For Short Term Trade

Brief Look At CAD JPY For Short Term Trade

Having scanned through the charts tonight there’s a number of charts at inflection points but nothing that I could deem as high probability, or at least high probability with minimal potential draw-down.

CAD JPY is one of the more interesting FX pairs but comes with a warning; Different time frames are showing potentially different outcomes, but I do think it’s possible there’s a short term trade coming up.

The Daily chart caught my attention because there’s a  long history of weak rallies followed by sharp sell offs and the current rally looks quite typical of that. What’s more there’s a strong technical relationship with the 61.8% Fib for this pair as can be seen in some detail on this old CAD:JPY analysis.

There is negative MACD divergence on the chart alongside clear rejection from the 61.8% Fibonacci level, so  assuming a short term top is in, it won’t be difficult to calculate where to place stop losses for a short position.

The converging MA’s near the 50% Fib level at approximately 79.70 (the circled area on the chart) would certainly spark my interest in entering a short position:

The Weekly chart also looks bearish at first glance, but further inspection does show a few things to be aware of. First of all there’s a pair of converging MA’s lining up with a short term trend line at 78.60 area and if support is found here it will certainly limit the potential profits on a swing short.

The Bearish argument comes from the failure if price to gain a Weekly close above the 80.75 area which is a historic congestion zone for this pair and a number of trend changes have occurred near this level. The previous swing high was quickly rejected by the 200 MA, but the current rally doesn’t appear to have enough strength to have any chances of reaching the 200 MA in the near term.

There is one Bullish argument on this time frame, it’s not an immediate threat, in actual fact it will probably take a while to come to fruition, and that is the higher high that can be seen on MACD alongside a lower price high. This kind of divergence alone is not something I would base a trade on, but it does signify that the next swing low on price could be the last one ahead of a reversal of the long term trend.

The chart explains:

So, for  my potential trade, I’m looking for an entry that will offer a low enough risk to enter a short position for a trade that’s likely to last anywhere between a few days and a couple of Weeks after which it would be time to re-evaluate the bigger picture.

Tomorrow is the first trading day of the 4th Quarter. The sentiment we see tomorrow and Tuesday can be a good guide to the directional bias we are likely to see across most markets over the next few Weeks so it’s probably best not to make any big trading decisions too quickly this Week, but if we see CAD:JPY at 78.70 to 78.90 over the next 48 hours then I’ll be keeping a close eye on short term price action to pick out a short entry, targeting an initial sell off to the 78.60 area from where further analysis can be made.

3 Comments
  • This Week's Swing Trading Round Up; 6th October 2012
    Posted at 18:11h, 06 October

    […] characteristics I like to see before entering a position.These were GBP:NZD for a Swing Long and CAD:JPY for a Swing Short.Of the 2 I’d have preferred a CAD:JPY position as it’s generally far […]

  • DOW / INDU / DJI Daily Analysis 10th October 2012
    Posted at 22:48h, 10 October

    […] then the green Daily 200 MA could become a reasonable target.As a side note, you may recall the CAD:JPY analysis discussed last Week. I wanted to enter that swing short today but felt that I had too many open […]

  • This Week's Swing Trading Round Up; 27th October 2012
    Posted at 00:59h, 28 October

    […] elsewhere I didn’t get the opportunity to get too involved with anything from the watch list.CAD:JPY is still high up on the potential trades list whilst this apparent topping action continues to […]