CAD/JPY Forecast - 20 January 2016

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By: DailyForex.com

The CAD/JPY pair initially tried to rally during the day on Tuesday, but struggled at the 81.75 region. Because of this, we ended up forming a rather resistive shooting star, which is what I love to see in a downtrend. This shows that the buyers are trying to get into the market and push the Canadian dollar higher, only to fail. With this, we get a bit of a “knock on effect” as the buyers are starting to lose money and will have to close their positions by selling. In other words, it just adds more bearish pressure.

I feel that a break below the lows for the Tuesday session would be reason enough to start selling as the market should then reach towards the recent lows again. I think the market will more than likely not only break down below the region down there, but continue to go even lower.

Selling Rallies

I think selling rallies will be the way to play this market going forward, and every time it rallies on the short-term chart I feel that sellers will get involved yet again. It makes sense, because we do have a major out when it comes to the pricing of oil recently. Remember, the Canadian dollar is highly sensitive to the price of oil, and Japan imports 100% of its petroleum. In other words, this is essentially a reverse image of the oil markets itself.

Even if we broke above the top of the shooting star at this point in time, I feel there is more than enough reason to think that it’s only a matter of time before the sellers get involved. The 85 level above is what I consider the “ceiling” in the market at this moment, and quite frankly don’t even have a scenario in which I’m comfortable buying. I think the Canadian dollar will also be highly volatile today due to the fact that we have the interest-rate decision coming out of Ottawa.

CADJPY

Christopher Lewis has been trading Forex for several years. He writes about Forex for many online publications, including his own site, aptly named The Trader Guy.