CADJPY Bulls to Face Big Challenge

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CADJPY has turned bullish since the 74.75 low was reached on May 7.

Despite the pair trading within a descending channel (started Oct 3,’18), prices recently crossed above the median regression line. The breakout was also supported by a retest of the 77.70/80 region.

With price action suggesting an upside bias in the medium-term, chances of the pair reaching the upper channel are increased. The level is indeed attractive near the 80 psychological resistance.

In the short-term, the upside scenario looks supported.cadjpy Here, we use more recent reference prices to build an ascending channel.

The momentum looks strong in the short term which can foretell two things: one – bias is going to remain unchanged (within the channel); two – a correction is likely depending on how close the price is to the upper channel.

That said, in the case of bulls taking over the 80 level with a false break formation, we can expect a correction and a continuation to fresh highs.

The latter could get us near 80.50. That is the 50% Fibonacci retracement of the 84.75-73.75 move.

If, however, bulls breakthrough without looking back, we can expect the prices to get to the upper channel and then retrace (it could be anywhere above the 80 level, to the 61.80% and higher).

Should we see a weak first attempt to take over the 80 region, we can expect a pullback down to the median regression line near 79.21. Lower lows near the lower channel can be expected too.

The RSI (9) indicates a short-term bearish move nevertheless.

 

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