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Short-term Trading Idea FX CADJPY – Bear Speculation: After a Break of 94.16, Expect a Fall to 91.72

Trading opportunities on currency pair:the CAD/JPY rate has formed 3 peaks. Whilst oil is trading above 56 dollars, if there’s demand for the yen, it’s likely to slide to 91.72. The 94.16 level will offer support. Since between the yen crosses there’s a mixed dynamic, it’s possible there’ll be a false break in the limit.

The Japanese yen is getting its safe-haven status back. Investors are moving away from any risks after the start of Saudi Arabia’s military operations in Yemen. The prices of gold and oil have risen on the back of fears that the delivery of oil from the Middle East will be interrupted.

An increased demand for the yen could be connected to the repatriation of profits from the end of the financial year, which in Japan ends on 31st March. Japanese exporters are converting their profit in foreign currencies to yen.

By the close of Friday, a barrel of Brent had lost 2.7 dollars to 56.13 due to fears about disruptions to oil supplies being overcome. The fall in oil quotations is negatively affecting the Canadian dollar.

The CAD/JPY had a day of decline. A sharp fall of the Canadian to 94.43 has forced me to pay attention to the 3 peaks that have formed. They are in the 94.16-94.61 price range. The 94.61 level is a 38.2% Fibonacci level from a drop of 103.98 to 91.72. The 94.16 level is a limit.

Whilst the CAD/JPY is trading above 94, there’s a probability of it going for 97. Between the yen crosses a mixed dynamic can be observed. It’s not possible to make a forgone conclusion that one or another scenario will take place. With this in mind, together with this idea for CAD/JPY, I made another for NZD/JPY (read here).

The Bank of Japan has already done everything possible to get inflation to 2%. Now it’s 2.2%. A stimulative program is needed only for the strengthening of the effect, since Japan is still threatened with deflation.  Whilst oil is still trading above 56 dollars, when there’s demand for the yen there’s a probability of a slide to 91.72.

Have a look at the AUD/NZD 4-hour graph I made. It’s really similar to a price dynamic. Why then wouldn’t sellers realize this model on the daily CAD/JPY?

If we take the temporary cycle into account, the break in the limit should take place as it get on towards Friday. The CAD/JPY rate could return to 95.30. Even if this happens, the price model will indicate a fall for the Canadian. It could be cancelled out with a growth past 97 yen.

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Forecasts which are made in the review constitute the personal view of the author. Commentaries made do not constitute trade recommendations or guidance for working on financial markets. Alpari bears no responsibility whatsoever for any possible losses (or other forms of damage), whether direct or indirect, which may occur in case of using material published in the review.

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