Navigating the Short-Term Reversal on CAD/JPY Amidst Policy Review Volatility in the Japanese Yen
28 April 2023
On Friday, the Japanese Yen was the weakest currency due to the announcement from the Bank of Japan that they will conduct policy reviews in the coming months. This has led to volatility in the Yen, as the potential shift in their policy could have a significant impact.
This weakness in the Yen has created some promising setups on pairs that include the Yen, such as CAD/JPY. Specifically, the weakness has created a nice short-term reversal that is part of a right shoulder of an Inverse Head and Shoulders pattern (yellow) on CAD/JPY. The neckline of this pattern is a horizontal resistance connecting crucial highs from December, February, March, and April.
Although the buy signal on CAD/JPY is not yet ready, it will be triggered when the price breaks the blue horizontal resistance. This will activate the iH&S formation. Until that happens, we are in a no man's land, and it would be safer not to be too bullish. However, after the breakout of the blue line, the history will be different.
Overall, the weakness in the Yen has presented an opportunity for traders to potentially profit from a reversal on CAD/JPY, but it is important to wait for the buy signal before making any trades.