CAD/JPY fell during the session on Thursday as the oil markets gave way. As many of you know, the Canadian dollar is driven mainly by the crude oil markets, but many of you won't know that the Japanese import 100% of their oil. It is because of this that the CAD/JPY pair is highly sensitive to movements in the oil markets. In fact, it's one of my favorite ways to play the oil market using currencies.
It appears that the pair is attempting to continue the long-term downtrend that we've seen for at least the last four months. This makes sense, as the oil markets have been coming unglued since about the same amount of time. The Japanese currency is getting stronger in general anyways, and adding to that the fact that oil is coming undone, this pair really has only one direction to go ultimately.
With this being said, I look at this pair as a "sell only" market. The next question is going to be whether or not we bounce from here and continue the consolidation of two the top of this rectangle, or do we break down?
Rectangle
The candle for the session on Thursday looks rather weak, and does suggest further selling. However, I want to see a breakdown in a move below the Thursday lows in order to start selling. Obviously, a bounce is possible from here, but it will run into serious resistance at the 78.50 level. I won't buy this market, so if it bounces I will simply wait till we get close to that area in order to start selling again on the first sign of weakness.
.jpg "CADJPY Daily 62912")
As for breakdown, on a break of the Thursday lows I believe that this market will plummet to the 74.50 level or so before running into any serious support. Quite frankly, this is the move I'm hoping for as it is the most profitable one. If we can manage to get a close on the daily chart above the 78.50 level, I would consider buying this pair on that move. Until then, I'm selling this pair using the above listed parameters.