Trade Of The Week: Further Downside Ahead For CADJPY

Sell CADJPY 

The recent rebound in Oil, having quickly recovered from fresh losses circa $25 per barrel, fuelled a correction higher in the Canadian Dollar on Friday. As Oil prices continue to decline, expectations gather for further BOC action despite recent neutral sentiment from the central bank. Conversely the Japanese Yen which has been appreciating further of late, despite the recent introduction of negative rates by the BOJ,  conceded some of its gains on Friday as a recovery in risk sentiment saw the traditional safe-haven currency less sought-after.  Heavy JPY selling late-week also prompted talk of possible BOJ intervention, though Japanese officials declined to comment, except to say that the Japanese Govt is watching the currency markets and will “act accordingly” if current moves persist.

Current reports surrounding the possibility of a an OPEC deal on supply cuts remain fairly precarious and market is prone to reacting negatively on signs that a deal isn’t forthcoming. Oil still remains capped below $29.40 resistance and as such is vulnerable to another down-turn. Similarly, with the return of key Chinese data this week (trade balance & CPI) there is a strong chance of a return to the risk-off environment which has dominated markets so far this year, fuelling further demand for JPY despite threats of further intervention.  Recent market moves in response to central bank policy adjustments are showing current central bank action to be ineffective and positioning remains the main driver.

Trade Idea 

The rebound in CADJPY has taken price back up into a retest of a key resistance area formed by recent broken-lows and the 38.2% Fib retracement from of the decline from February highs. If price can hold this level I expect a reversal to test 79 area lows once more.

Sell a break below 82.11, stop 83.11  target 79.70

UPDATE: Stopped out – 100 pips