CAD/JPY edged north on Tuesday, breaking above the key resistance (now turned into support) barrier of 88.05. That barrier had been acting as a temporary ceiling for the rate since July 21st, and its break has confirmed a forthcoming higher high on both the 4-hour and daily charts, increasing the chances for further advances, at least in the short run.
We would expect the bulls to stay in charge and perhaps aim for the 88.72 barrier, marked by the high of July 13th. If they don’t stop there, we could see extensions towards the peak of July 7th, at around 89.15, the break of which could carry larger bullish implications, perhaps setting the stage towards the high of July 6th, at 90.10.
Taking a look at our short-term oscillators, we see that the RSI just ticked below its 70 line, while the MACD, although above both its zero and trigger lines, shows signs of topping. Both indicators detect strong upside momentum, but the also suggest somewhat of a slowdown, and that’s why we will stay careful of a possible setback before the next leg north.
However, we will abandon the bullish case only if we see a clear dip below 87.60. This could encourage the bears to dive towards the low of July 27th, at 87.02, the break of which could pave the way towards the low of August 3rd, at 86.55, or the low of July 21st, at 86.25.
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