CAD/JPY traded higher yesterday, after it hit support near the upside line drawn from the low of August 25th. The rebound continued today as well, but the rate was stopped near the 83.90 barrier, which provided resistance on December 31st and January 2nd. As long as the rate trades above the aforementioned line, we would consider the medium-term outlook to be positive.
However, we would like to see a decisive break above 83.90 before we get confident on a trend continuation. Such a move would confirm a forthcoming higher high on the daily chart and may initially aim for the peak of April 17th, at around 84.35. If the bulls are not willing to stop there, then a break higher could see scope for more upside extensions, perhaps towards the 85.20 zone, defined as a resistance by the high of March 1st.
Looking at our daily oscillators, we see that the RSI rebounded from near its 50 barrier, while the MACD lies within its positive zone, below its trigger line, but shows signs of bottoming. It could cross back above its trigger soon. These indicators suggest that CAD/JPY has started gaining back upside speed, and support the notion for the bulls to stay in charge.
On the downside, we would like to see a clear dip below the 82.55 territory, before we start examining the case of a reversal. This would bring the rate below the pre-mentioned upside support line drawn from the low of August 25th, and may encourage the bears to push towards the low of December 9th, at around 81.75. If they manage to overcome that hurdle as well, then we could see them targeting the 81.35 area, near the lows of November 20th and 21st.
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