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CAD/JPY poised for a 700 pip drop

Last updated 1/23/2009 1:36 PM EST (GMT -5) 0 Comments - Add your comment

Today, the CAD/JPY spiked up to 72.01 just above converging Fibonacci resistance resulting in a nearly perfect bearish butterfly pattern (see 1hr chart). This sell pattern has potential to lead to nearly a 700 pip nose dive over the next several days as the CAD/JPY has recently dipped below previously established daily support near 71.00-70.50 (see daily chart).

However, there is a bit of room to the upside to the 161.8% extension of BC near 72.50 and the 161.8% ABCD extension near 73.00--both of which still leave us with a valid bearish butterfly. That said, stops should be placed just above 73.00 with initial profit targets set just above 38.2% and 61.8% of CD.

Now the exciting part....the dip below daily support near 71.00-70.50 a few days ago suggests a bearish break-out of the descending triangle consolidation pattern seen on the daily. If prices drop below this level a bullish continuation is likely down to converging Fibonacci support near 64.50-64.00. Should this scenario play out over the next several days, we are then looking at a bullish butterfly pattern completing (see daily chart) which would be an ideal spot to not only take profit, but to potentially switch gears and go long. We don't want to get too ahead of ourselves, so we will keep you posted as this pattern develops....

(click on chart to enlarge)


Daily Chart - Room down to bullish butterfly pattern complete at 161.8% of BC, and 141.4% of XA.	1hr Chart - Bearish butterfly pattern complete at D just above 127.2% of BC, and 127.2% of XA

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