After declining quite sharply in the first days of October, it looks like CAD/JPY started consolidating and is now forming a range between the 85.70 and 86.45 levels. At the time of this analysis, the pair is testing the upper side of the range. For now, we will stay put and wait for a clear break of any of the sides first, before we assume a further continuation in the direction of the break.
If the upper side of the aforementioned range at 86.45 gets broken, this could invite more bulls to the table as it could open the path towards higher resistance levels like the 87.00 obstacle, marked by the lows of the 8th and the 9th of October. If the buying continues and that obstacle is not able to hold the pair down, then this could lead towards the 87.45 barrier, marked by the high of the 10th of October.
The RSI has bottomed near 20 and moved higher from there and now sits just slightly above 50. The MACD is also moving higher, after bottoming on the 11th of October, is above the trigger line, but still remains below zero. Judging from what we see in our indicators, they are somewhat in support of the upside, but still have an element of the doubt in them, as they haven’t made a strong shift into the bullish territory yet.
On the downside, in order for us to get comfortable with lower levels, we would wait until the pair moves below the 85.70 barrier, which is the lower side of the previously mentioned range. Only then we will aim for the next potential level of support at 85.45, a break of which could set the stage for a test of the 85.10 hurdle, which was the low of the 12th of September. If the bears remain strong, then we could see CAD/JPY traveling all the way to the 84.65 level, marked by the inside swing high of the 7th of July.
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