Talking Points
CADJPY breaks key technical support
Medium-term bias backed by fundamental outlook
Broader outlook remains weighted to the downside sub-95.78
CADJPY Daily Chart
Chart Created Using FXCM Marketscope 2.0
Broader Technical Outlook
CADJPY breaks multiple trendline support structures
We’ve now taken out the last 6-month range in past 3.5 weeks
USDCAD confirms topside breakout- constructive
Technical outlook now supported by fundamentals
Key support objective 91.32/85 range (Fib support / June low)
Subsequent support targets at 89.88 – 90.00 & 88.28/49
Scalp bias bearish below 93.58- Broader outlook bearish below 95.78 (200DMA)
Note RSI breakdown sub-40 for the first time since early August
First directional break sub-30 since early June- bearish
Event Risk: Canadian CPI data Tomorrow
CADJPY Scalp Chart
Notes: The CADJPY has broken some key support targets this week and the technical damage done keeps our focus weighted to the downside. It’s been a tough month for the pair with a decline of more than 6.7% since the start of 2014 trade and while some indicators may look quite stretched here it’s important to note that in strong directional trends momentum gauges can remain so for some time. Note that a few topside triggers are pending on the 30min which would take us out of short exposure and offer more favorable entries.
A key topside break in the USDCAD and a more dovish tone from the BoC continue to support further CAD weakness. Meanwhile the BOJ has continued to sound more upbeat with Governor Kuroda noting that the 2% inflation target might be attainable by late 2014. Lending further validation is massive outside day in the USDJPY today which has taken out the weekly opening range high & low in one swift move. The combination of loonie weakness and near-term yen strength remains the play here- but be warned: the snap-back on these can be radical.
Near-term focus remains on the short-side while below the 93.41/58 resistance region. This range is defined by the 61.8% extension from the decline off the 2013 high, the November low and former trendline support dating back to June. Look for a reaction in the 91.30/85 region where more significant support is eyed. Keep in mind that all the downside targets highlighted here are major technical thresholds, each of which could produce a more meaningful recovery.
Bottom line: We’ll look to sell rallies/breaks of support with only a breach above 93.41/58 shifting our immediate bias to neutral. Such a scenario looks for short conviction around the weekly opening range low at 94.71/79. On a larger scale the pair is now testing support of a broader range carved out since the May 2013 highs with each subsequent support break building the case for our medium-term outlook. Follow the progress of this trade setup and more throughout the trading week in DailyFX on Demand.
* It’s extremely important to give added consideration regarding the timing of intra-day scalps with the opening ranges on a session & hourly basis offering further clarity on intra-day biases.
Key Threshold Grid
Entry/Exit Targets
Timeframe
Level
Significance
Resistance Target 1
Daily / 30min
93.05
61.8% Fib Extension
Resistance Target 2
30min
93.24
61.8% Retracement
Bearish Invalidation
Daily / 30min
93.41/58
61.8% & 50% Exts / November Low
Break Target 1
30min
93.85
Soft Resistance / Pivot
Break Target 2
Daily / 30min
94.13/21
38.2% Fib Ext / 23.6% Retrace
Break Target 3
30min
94.40
Soft Resistance / Pivot
Break Target 4
Daily / 30min
94.71/79
23.6% Ext / 50% Retrace / Weekly ORL
Break Target 5
Daily / 30min
95.56
Weekly ORH
Break Target 6
Daily
95.73/78
100 & 200DMAs
Bullish Invalidation
30min
92.25/28
78.6% Fib Ext / August Lows
Break Target 1
Daily / 30min
91.78/85
78.6% Ext / June Low
Break Target 2
Daily / 30min
91.15/30
78.6% Retrace / 100% Fib Ext / April Low
Break Target 3
Daily
89.88 – 90.00
100% Fib Ext / 38.2% Retracement
Break Target 4
30min
88.28/49
161.8% & 61.8 Exts / Feb Low
Average True Range
Daily (20)
86
Profit Targets 21-23pips
*ORH: Opening Range High
*ORL: Opening Range Low
Other Setups in Play:
USDCHF Scalp Setup Eyes Channel Support- Bullish Above 9080
EURUSD Bias At Risk Above 1.3522- Weekly Opening Range in Focus
AUDCAD Scalps Target Key Support- Bias Bearish below 9746
Scalping EURNZD Correction- Bias Bullish Above 1.6154
EURAUD Scalps Eye Channel Breakout- Bias Bullish above 1.5020
—Written by Michael Boutros, Currency Strategist with DailyFX
For updates on this scalp and more setups follow him on Twitter @MBForex
To contact Michael email mboutros@dailyfx.com or Click Here to be added to his email distribution list
Join Michael for a Live Scalping Webinar next week Monday-Thursday morning on DailyFX Plus (Exclusive of Live Clients) at 1630GMT (11:30ET)
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Source: Daily fx
