Cad/jpy reaction as oil price craters

CAD/JPY reaction as oil price craters

An important module in our Forex Program is understanding cross-market relationships and one of the most important is the one between oil and the petro currencies of which the Canadian dollar is one. In this morning’s webinar, we considered the price action on the cad/jpy which was driven lower not only by the crash in oil but also a souring of market sentiment as money flowed into the Japanese yen.

In such strong market moves identifying important support and resistance levels is key, not only for establishing possible pause points and reversals, but also for potential points to join the prevailing trend.  This is where the Camarilla indicator can help as we can see in the video. The version used is for the MT5 platform.

00:10

Overview of CAD/JPY and multi timeframe analysis

00:10

The speaker discusses analyzing the CAD/JPY currency pair using multiple timeframes, including slower ones, to better understand market movements and support/resistance levels. They emphasize the importance of identifying potential target areas where price may stop, pause, or reverse across different timeframes. The hourly chart is highlighted as particularly useful for gauging whether the trend will continue or reverse.

02:04

The speaker notes that the Japanese yen is still rising and that markets can remain overextended for prolonged periods. They observe ongoing selling pressure on the Canadian dollar, which is consistent with current market conditions, and begin to consider how these factors interact in their analysis.

02:00

Daily chart shows bearish consolidation and swing trading

02:00

The speaker discusses the daily chart, noting that the Caddy end is now below the volume point of control, indicating a bearish outlook. The price has been in a range, showing congestion and consolidation, which is typical for swing traders who hold positions longer and look for reversal points. They focus on identifying swing highs and lows as signals of reversal, though trading within a range can be challenging and not necessarily easier despite common beliefs.

03:14

Understanding trends and corrections in price action

03:14

The discussion focuses on understanding trends in trading charts, particularly distinguishing between primary and secondary trends. It explains how in a faster timeframe, pullbacks and corrections occur within a trend, and traders must decide if these moves are tradable secondary trends or reversals. Volume and volume profile (VP) indicators help determine the nature of these moves. The speaker also touches on the concept of selling during pullbacks and the importance of recognizing whether a move is part of a continuation or a reversal.

04:21

The speaker contrasts price action in trending markets versus ranging markets, noting that the tactics differ. In range-bound markets, swing trading is preferred, involving holding positions for hours or days and identifying swing highs and lows within the range. The volume point of control is highlighted as a key indicator of market balance during consolidation phases, reflecting a neutral state where no clear directional bias exists. This balance may persist while the market awaits new information or seasonal influences.

05:21

Volume point of control and market balance explained

05:21

The speaker explains the concept of the volume point of control, highlighting how price and volume interact over time during consolidation phases. The longer the price remains in this balanced state, the stronger the subsequent breakout tends to be, illustrating the principle of cause and effect. They observe that the price has broken away from the volume point of control multiple times but has also reversed back, indicating volatility. Currently, the price is moving downward, reflecting bearish sentiment in the oil market, which is consistent with broader market collapses. This analysis is made from a daily perspective before switching focus to an hourly chart.

06:31

Trend volatility and price behavior in faster timeframes

06:31

The speaker discusses a period of lower volatility within a downward market trend, highlighting that not all trends behave the same way. Some trends are smooth with gradual corrections, while others are choppier with sharp pullbacks and increased volatility. The analysis focuses on volume in relation to price candles to determine whether pullbacks are temporary or signal trend continuation. The segment explains how volatility can be triggered when price moves outside the average true range, causing price to revert within the candle’s range and continue the trend. Specific candle examples, including doji-like candles with low volume, are examined alongside volume-based support levels on an hourly chart, emphasizing the importance of volume protocol in understanding price movements.

08:26

Using Renko charts for smoother trend entry points

08:26

The speaker explains the use of Renko charts to smooth out market volatility and identify the nature of price moves, including momentum and minor pullbacks. Renko charts can serve as entry points in trending markets, allowing traders to exit when specific signals appear and re-enter logically rather than chasing price. The importance of combining Renko with price structure analysis, primary and secondary trends, and faster time frames is emphasized to make confident trading decisions.

10:10

The discussion focuses on using multiple time frames to confirm trade decisions, especially looking at support and resistance levels via the Camarillo method on slower charts. This approach helps determine whether a price move is likely to continue or reach a key reversal point, signaling when it might be time to exit a trade. The example highlights price congestion and key levels that indicate potential pauses or reversals in the trend.

11:19

The speaker analyzes a specific Renko move of less than 20 pips, noting that smaller moves are common and still tradable. They point out the price is entering a congestion area near the S4 support level defined by the Camarillo method, which has been expanded to six levels in their setup. This congestion and key support level explain the current price behavior and suggest caution due to potential pauses or reversals.

12:36

Camarillo indicator and key support/resistance levels

12:36

The speaker explains the use of four key levels in their indicator, focusing mainly on the S4 level, which signifies a valid breakout when price breaks through it with volume. This level can cause price congestion before and even after breaking through, often acting as a retest point. Between R1 and S1 lies the ‘neutral zone,’ a consolidation area where price tends to trade sideways. Using a 3-minute chart with the Camarillo indicator, congestion is observed at a key price level, which is also reflected by the slow movement on the Renko chart, indicating market hesitation as it approaches this important level.

14:25

The hourly chart confirms the significance of the S4 level, showing confluence across multiple timeframes, which typically causes price to pause due to increased resistance. The speaker discusses the next possible target if the price breaks through S4, noting the importance of the S5 level as a logical staging post and potential entry point if the downward trend continues. These levels help traders anticipate potential price travel and areas of congestion.

15:35

Further levels S5 and S6 are explained as potential targets, with S6 representing the furthest reach for the day. These levels are recalculated daily after market close and apply to all timeframes up to but not including the hourly. When price breaks through S6, strong momentum and volatility often follow. The levels provide precise values that help traders approach their trades with greater confidence and relaxation.

16:45

The speaker highlights that these levels, like Fibonacci levels, tend to hold up in the market, providing reliable reference points. They mention related tools such as Accumulation Distribution on MT4 and V Pot on NinjaTrader that also offer precise levels. The Renko chart’s pause at key levels further indicates market hesitation. Traders are advised to be patient during congestion phases, waiting for confirmation of either a reversal or breakout.

17:54

Patience is emphasized during market congestion to determine if price will reverse or break through key levels. Using these levels on slower timeframes, combined with indicators like Camarillo, offers a clear and straightforward approach to trading decisions. If a reversal occurs, the levels help identify potential target points. The speaker concludes by referencing the CSI and other chart observations to reinforce the practical utility of these methods.

19:05

Strength of CAD and JPY flows and trend continuation

19:05

The discussion focuses on the significant overextension of the Canadian currency, which has moved beyond typical bounce-back levels. Despite attempts to move higher, the Canadian dollar is being strongly pushed lower due to equally strong inflows into the Japanese yen and outflows from the Canadian dollar. The speaker notes that on the hourly chart, there is still potential for further downward movement, with minor pullbacks on faster timeframes seen as shallow and temporary within the dominant bearish trend. The analysis concludes with a transition to another speaker named David.

By Anna Coulling – creator of volume price analysis