CAD/JPY Chartpack - Technicals & Hedging Setup

CADJPY minor trend has been spiking through uptrend line (refer daily chart). There has been tight tug of war between hammer and bearish engulfing, bulls, for now, seem to have been exhausted on overbought sentiments coupled with the engulfing pattern at 81.878 levels. The current price have slid below 7 & 21-DMAs, and the trend is testing support at the uptrend line. 

Bulls in the minor trend, attempt to bounce back at this juncture, but the major trend still appears to be edgy as the failure swings at 21-EMAs recently has reminded the major downtrend. These levels were acted as the stiff resistance several times in the recent past. Consequently, bears managed to pull swings back below EMAs.

The major downtrend of this pair which has been in the consolidation phase since December 2015 has now been signalling weakness again upon the formation of head and shoulder pattern and above stated bearish engulfing pattern drag slumps to develop this pattern (refer monthly plotting).

Head at 91.638, left shoulder at 88.922 and right shoulder at 87.851 levels. Shooting star pattern pops-up at that juncture hampers previous bullish momentum on this timeframe. 

Overall, the major trend still seems to be weaker as both momentum oscillators (RSI & Stochastic curves) and bearish EMA & MACD crossovers are still in bears’ favor.

Trade tips: At spot reference: 81.644 levels, ahead of BoC monetary policy meeting that is scheduled for this week, contemplating above technical rationale, it is advisable shorting CADJPY CME futures contracts of November-month tenors, simultaneously, add fresh longs in December tenors on hedging grounds, as the underlying spot FX likely to target southwards in the near terms and consolidate in the medium terms.