CAD/JPY has been trading in a trendless mode since August 5th, with the 79.30 and 80.50 barriers containing most of the price action. We had some violent spikes out of those bounds, but the pair was quick to return back in between them. Thus, as long as the rate is trading within the range defined by those two hurdles, we will hold a flat stance.
At the time of writing, CAD/JPY is flirting with the lower bound, where a break could signal that the bears are back in the driver’s seat, and could allow declines towards the 78.50 zone, marked by the low of August 25th. If that level is not able to halt the slide this time around, its break may see scope for extensions towards the 78.20 territory, defined by the low of January 3rd.
Shifting attention to our short-term oscillators, we see that the RSI lies below 50 and points down. It looks to be heading towards 30. The MACD stands slightly below both its zero and trigger lines, pointing down as well. Both indicators detect negative momentum and enhance the case for a rate-drop below 79.30.
On the upside, we would like to see a strong break above 80.50, the aforementioned range’s upper end, before we start examining whether control was passed to the bulls. Such a move could initially set the stage for the 81.00 area, near the peak of August 13th, the break of which may extend the recovery towards the 81.40 level, which is marked as a resistance by an intraday swing high formed on August 1st.
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