WTI is trading at major 61.8 fib level.
CAD has positive correlation with oil prices -
Canada is the world's third-largest exporter of oil . At times, the positive correlation between CAD and oil can be over 95%.
JPY has negative correlation with oil prices -
Japan is the third largest importer of oil in the world importing around 78% of its oil consumption, so higher energy prices tend to weaken the JPY.
A bounce in WTI could be a catalyst for a bounce in CADJPY which is also trading near major fib levels.
I'm not super confident in this play for a few reasons:
1. The 76 and 86 fib levels were broken, meaning the profit target would only be to a retest of 61.8/50 levels.
2. The bounce in WTI/ CADJPY would likely be small or it could occur at much lower levels. Tight stops are a must.
3. Move down in WTI/ CADJPY has been strong and steady, and the bounce has been weak so far. Recent price action looks like a bear flag .
4. During some periods, the correlation between CADJPY and oil prices hasn't been strong. Even if bounce in WTI occurs, it might not cause bounce in CADJPY . It could just cause a longer bear flag with little upside. This would be a strong indication of further weakness in CADJPY , and I would look to short any signs of bear trend continuation in WTI.
I'm actually more interested in shorting CADJPY for a longer term position; however, a bounce in WTI could allow for a much better entry price. I'd be looking to short any bounces to 61.8/50 levels. It may be wise to sit out of any CADJPY longs and just look to short bounces. If downtrend continues through lows, same logic applies: short any rallies/retests of previous downside breakouts.
CAD has positive correlation with oil prices -
Canada is the world's third-largest exporter of oil . At times, the positive correlation between CAD and oil can be over 95%.
JPY has negative correlation with oil prices -
Japan is the third largest importer of oil in the world importing around 78% of its oil consumption, so higher energy prices tend to weaken the JPY.
A bounce in WTI could be a catalyst for a bounce in CADJPY which is also trading near major fib levels.
I'm not super confident in this play for a few reasons:
1. The 76 and 86 fib levels were broken, meaning the profit target would only be to a retest of 61.8/50 levels.
2. The bounce in WTI/ CADJPY would likely be small or it could occur at much lower levels. Tight stops are a must.
3. Move down in WTI/ CADJPY has been strong and steady, and the bounce has been weak so far. Recent price action looks like a bear flag .
4. During some periods, the correlation between CADJPY and oil prices hasn't been strong. Even if bounce in WTI occurs, it might not cause bounce in CADJPY . It could just cause a longer bear flag with little upside. This would be a strong indication of further weakness in CADJPY , and I would look to short any signs of bear trend continuation in WTI.
I'm actually more interested in shorting CADJPY for a longer term position; however, a bounce in WTI could allow for a much better entry price. I'd be looking to short any bounces to 61.8/50 levels. It may be wise to sit out of any CADJPY longs and just look to short bounces. If downtrend continues through lows, same logic applies: short any rallies/retests of previous downside breakouts.