CAD/JPY Price Analysis: Bulls target a deep correction

CAD/JPY is moving in on a high liquidity area marked by the prior daily lows, supported by the dynamic ascending trendline. 

The following illustrates the playbook for targeting the prior support that would be expected to be retested in the forthcoming hours. 

Daily charts

Both these daily charts illustrated the bullish bias towards the liquidity area.

The chart below offers an example of how the price moved back into the liquidity zone before melting to the prior daily resistance.

The same might be expected of the similar market structure from which bulls can target for a trading opportunity. 

Prior example, daily chart

Hourly chart, trade set-up

For a 1:2 risk to reward high probability set-up, on a retest of the support structure, 89.59 accounting for a 2 pip spread, bulls can target the daily liquidity area near 90.00, with an entry protected by the bullish structure below the corrective lows, 89.403. 

That being said, the price has already retested support on an hourly basis, so there is every chance that the horse may have already bolted, (but buying at resistance is never a favourable strategy).

With that being said, a reduced risk entry from the 10 EMA on a lower time frame, such as the 15-min chart, and presumed support structure is an option also for those on raw spreads (or taken at market if factoring in the spread), (almost certain to be triggered in potential volatility around the Tokyo fix):

In such a scenario, the stop loss would need to be moved higher to below the secondary structure in order to maintain a 1:2 R/R.