After trending lower towards the end of last year and the start of this year, CAD/JPY has formed a consolidation pattern and is indicating a possible reversal of the previous downtrend. A triple bottom can be seen on its 4-hour time frame and a break above the neckline could confirm the potential rally.
Canada recently printed stronger than expected jobs data while Japan is looking at further easing or a dovish BOJ rate statement for this week, as the sales tax hike has been implemented and might result to weaker economic performance.
The pattern’s neckline is located at the 94.00 major psychological mark and a strong upside break could carry on for as much as 300 pips, which is the size of the triple bottom pattern. Stochastic is almost in the oversold zone, indicating that buyers may be ready to jump in soon.
A long trade above the recent high or at the 95.00 major psychological level and a tight stop below the neckline could yield as much as a 2:1 return on risk if one aims for the 97.00 resistance.
By Kate Curtis from Trader’s Way