The Canadian dollar has been trading in a descending channel against the Japanese yen for the past 18 consecutive days. The decline began after the pair completed what appears to be the fifth leg of our Elliot wave structure at the 89.203 area.
The reasoning behind this deep retracement can be found in an assortment of global issues that are proving to benefit the Japanese yen. Over the past months we've seen altered monetary policy, worsening trade wars and increasing crude oil costs. All of which are displaying to be too much for the modern investor at this current time.
Our current analysis on CAD/JPY confirms the completion of a WXY corrective structure within the channel, leading us to believe a continuation of the macro Elliott wave cycle is ready to resume.
Currently, the pair is trading at the upper resistance of our 18 day bearish channel pattern at 86.004 and could be set for a bull run. However, given that the we expect to engage a stop-hunt at the previous low, the pair should continue trending south during the next trading sessions until the hunt has taken place.
Although the weight of seller to buyer ratio is fundamentally neutral for both pairs, price action and volume current gives us added confluence that the Canadian dollar is expecting a rally to the upside within the coming days.
A stop-hunt is expected to take place at the recent low before engaging our long positions.
Trade recommendations are for a long outcome on the CAD/JPY going ahead this week. Winterfield analysts are looking at the 89.20 area for targets while anything below the 84.651 level is considered invalid.