During the Asian morning yesterday, CAD/JPY broke below its short-term upside support line drawn from the low of December 4th. The pair travelled lower and found support near the 83.07 hurdle, from which it rebounded slightly. It tested that upside line from underneath, which continues to hold the rate down. At the same time, CAD/JPY is below the 200 EMA, which is also adding a negative spin on the near-term outlook. For now, we will take somewhat of a bearish approach, but to get a bit more comfortable with the downside, we would like to see a drop below the 83.07 zone.
Eventually, if the rate slides below that support area, at 83.07, this would confirm a forthcoming lower low and more sellers could be joining in. We will then aim for the 82.80 obstacle, marked by the current lowest point of January, which could initially stall the pair. If it manages to rebound a bit higher, but fails to drive back above the 83.07 barrier, this may attract the bears back into the field. Such actions could increase the pair’s chances of drifting further south, where if it falls below the 82.80 zone, this could clear the path to the 82.31 level. That level is marked by the low of December 12th.
Alternatively, if CAD/JPY travels back above the aforementioned upside line and pushes above the 83.55 barrier, marked by the low of January 9th and today’s current high, more buyers may see it as a good opportunity to step back into the game. We will then target the 83.91 obstacle, a break of which could open the door for a further move to the 84.34 level, marked by the high of January 22nd.
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