Why I shorted CAD/JPY @ 88.57 instead of long USD/CAD @ 1.0251

CAD/JPY failed a major resistance level at 90 and has edged out an obvious intermediate-term downtrend (Fig 1). USD/CAD is also bouncing off a major support at 1.0200 (Fig. 2). And crude oil is below $80 on a slippery slope. As such, shorting loonie seems like a good move at the moment according to my FTC trading setup. Yet, here is why I am opting to short CAD/JPY and not long the more popular USD/CAD currency pair.

Figure 3 shows a 5-year, weekly chart of CAD/JPY (top) and USD/CAD (bottom). Evidently, the exchange rate of CAD/JPY is still in a depressed mode since the fall of September 2008. It’s also clear on this chart that why I say 90 is a major resistance level. Beside from being a nice round number, CAD/JPY has failed to break above 90 twice since August 2009.

As for USD/CAD, the picture isn’t as clear. 1.0200 is definitely a very strong support because it marks the top of a 6-month range in the first half of 2008. Yet, the downward slope in the long term since 2005 is not to be ignored. As such, I do not dare to bet on a bounce on this pair at this price.

Moreover, the intermediate-term move on both of these pair is giving us a confirmation. CAD/JPY is now testing a falling trendling (Fig. 1). Whereas USD/CAD is testing a falling support. Thus, I am shorting CAD/JPY under pressure. Going long on USD/CAD now would be like betting it to bounce on a slippery slope.

CAD/JPY, 3-hour

USD/CAD, 3-hour

CAD/JPY and USD/CAD, weekly chart

Related posts:

1. A change of wind for Australian dollar: Shorted AUDUSD @ 0.9183 and AUDCAD @ 0.9546
2. Paper trade: Long CADJPY @ 86.88, Stop 86.10, Target 88.0
3. Paper trade: Long AUD/JPY @ 81.22, SL 80.99, TP 82.50
4. Paper trade: USD/CAD long 1.07426, stopped out 1.06999 (-42.7 pips)
5. Paper trade: Long USD/CAD 25% @ 1.02988, stop 1.02080