This morning I shared an idea with a similar chart on Minyanville's "Buzz & Banter" and thought I'd share it with the good folks of TradingView as well.
CADJPY displays a daunting Head & Shoulder's Top very similar to what we see in USDJPY. The major pairs always have more trickery involved to some degree and Dollar Yen has been a nervous, noisy trade the last several days. In contrast, CADJPY has been a cleaner tell as to what's really going on in global macro.
CAD is a commodity currency and therefore often reflects the sentiment of crude oil and gold, among others. Last week's COT report revealed record long positioning in front month Crude contracts. The crowd is usually wrong, unfortunately. Further, I was reminded the last few days that the S&P 500 "Is always long Crude." In other words, a breakdown in CADJPY could foretell a breakdown in Crude and thereby a breakdown in US equity indices.
I'm not sure what came first; the chicken or the egg. Certainly there are many other factors at play in creating this very bearish H+S formation other than my simpleton takeaway. However, given the CADJPY correlation to other major currencies that effect US equity markets - I think a triggered formation here has grave implications for US equity bulls.
Keep an eye on the pair as a leading indicator for now. Anything can happen and the risk/reward isn't there to justify a short entry just yet (at least not a full position imo). Think of CADJPY as a proxy for USDJPY with cleaner price action in the current market environment (these things change over time).
Good luck out there, keep 'em tight!
DP
CADJPY displays a daunting Head & Shoulder's Top very similar to what we see in USDJPY. The major pairs always have more trickery involved to some degree and Dollar Yen has been a nervous, noisy trade the last several days. In contrast, CADJPY has been a cleaner tell as to what's really going on in global macro.
CAD is a commodity currency and therefore often reflects the sentiment of crude oil and gold, among others. Last week's COT report revealed record long positioning in front month Crude contracts. The crowd is usually wrong, unfortunately. Further, I was reminded the last few days that the S&P 500 "Is always long Crude." In other words, a breakdown in CADJPY could foretell a breakdown in Crude and thereby a breakdown in US equity indices.
I'm not sure what came first; the chicken or the egg. Certainly there are many other factors at play in creating this very bearish H+S formation other than my simpleton takeaway. However, given the CADJPY correlation to other major currencies that effect US equity markets - I think a triggered formation here has grave implications for US equity bulls.
Keep an eye on the pair as a leading indicator for now. Anything can happen and the risk/reward isn't there to justify a short entry just yet (at least not a full position imo). Think of CADJPY as a proxy for USDJPY with cleaner price action in the current market environment (these things change over time).
Good luck out there, keep 'em tight!
DP