After Tuesday’s and Wednesday’s successful rally, CAD/JPY has slowed its advance and switched to a more calm mode, where the pair is now seen coiling up and forming something like a pennant. Overall, CAD/JPY is still trading above its short-term upside support line running from the low of June 2nd. For now, we will remain cautious and wait for the pair to exit the triangle/pennant formation and break either below or above one of our key levels, before we examine a further directional move. That said, according to textbook rules, such patterns tend to indicate a continuation of the preceding trend, so there is a slightly greater chance the pair could continue moving north. But as mentioned above, we have to wait for a confirmation break first.
A break of the upper side of the pennant and a push above the 82.35 barrier, could spark some more interest among buyers, who could help lift the rate higher. This is when we will aim for the 82.55 hurdle, which is marked near the highs of May 21st and 22nd. The pair might get held near that area of resistance, or even correct back down a bit. But if it continues to trade above the 82.35 zone, CAD/JPY could make its way further up and target the 82.70 level, marked near the lows of May 2nd and 3rd.
Our oscillators, the RSI and the MACD, have topped, but still remain near their highs. The RSI is above 50 and is currently flat. The MACD is also a bit flat, remains in the positive territory, but recently shifted fractionally below its trigger line. Both indicators seem to be confirming a slowdown in momentum, hence why we will not rely on them too much, for now.
On the downside, similar rules apply, as for the upside. If the lower side of the pennant breaks and the rate falls below an important support area, at 82.10, marked by today’s low, this could open the door to some lower areas. The first potential support zone could be seen near the 81.86 hurdle, marked by the peak of June 20th. Initially, that zone could hold the pair from moving lower. But if it is still a no-match for the bears, a break below the 81.86 obstacle could send CAD/JPY further south, possibly aiming for the 81.70 level, which is near the high of June 12th and near the intraday swing high of June 20th.
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