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

By Paul | Published: January 15, 2010

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

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This entry was posted in Aussie, Kiwi, Loonie, Trading Strategy and tagged CAD, entry, FTC, JPY, paper trade, USD. Bookmark the permalink. Post a comment or leave a trackback: Trackback URL.

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