CADJPY price is currently in a high-confluence reversal zone. There are several factors to suggest that we may expect a reversal of the current bullish trend.
Here’s the top-down analysis.
Overall weekly trend is bullish. In the context of higher timeframes, price has moved only sideways in a rangebound market since 2013 (range zone marked in light blue.) The current price is at the top boundary of the range, which means there is a higher probability of the market being bearish in the coming weeks. Although there has been a false breakout of the upper ceiling at the end of 2014, the price had dropped right back into the zone, which suggests that bulls are failing to hold price at higher levels for longer periods.
Fibonacci retracement levels off the last clear impulsive bearish wave also reveals that the upper level of the range is right at the golden ratio as well. There you have another important confluence factor to support a forthcoming bearish wave.
Price has been ranging roughly within a 130 pip range from the start of June and the resistence level of the zone is marked around a nice round figure – 101.00.
We also saw that price touched the trendline resistence right at the 101.00 level and bounced off of it sharply. However the bulls held on and retested the level once again and failed to close above it. So the level holds and currently the price is in a rally that could most likely be the 3rd retest of the resistence level.
Closer look at the daily range in the H4 chart reveals a couple of more interesting points. Short term price action for the last 10 days or so has been creating lower highs. Current price is so significant that its also in the process of testing the the trend line resistance (marked by connecting the last few lower highs.)
The last H4 candle is a nice looking pin bar. If you observe closely the chart, you could clearly see what happened the last time the market created a pin bar at the trend line resistance.
Here at the micro level (compared to weekly timeframe) H1 chart has formed a nice looking Gartley pattern. The important thing to notice is that not only the pattern has been completed perfectly up to the pip as the last H1 candle-high is exactly the 78.6% retracemant of the XA leg, but also the D point PRZ is strongly supported by an H1 resistance level of 100.50 – which is also a psychologically important level.
So Hers is My Case for a Short Bias on CADJPY as a Summary
- Current price is at the top resistance level of the rangebound zone
- The resistance level is also at the 61.8% retracemant off the last impulsive bearish leg
- Bounced off the the upper trendline resistance
- Bullish momentum seems to be exhausted and the price ranges in a tight 130 pip zone
- Failed to break the horizontal resistance level of 101.00
- 101.00 is also a psychologically significant round figure level
- Price has made a series of lower highs below the 101.00 level
- Last H4 candle on Friday was a pin bar off the trendline resistance
- Perfectly completed Gartley pattern right at the last H1 candle on Friday
- “D” point of the completed Gartley is also at a significant H1 level of 100.50
- Last H1 candle on Friday was a downward pin bar that shows slight rejection off the level and the PRZ
- 100.50 is also another significant psychological level
So my expectation is that the price is at a major reversal zone and the bullish retracemant may have been completed already.