CAD/JPY Tumbles Below 81.50; Will the Free Fall Continue Below 80.00?
|CAD/JPY has been trading in a collapsing mode since the 13th of March and yesterday, it managed to break below the key support barrier of 81.50, defined by the lows of the 5th, 6th and 7th of the month. The move confirmed a forthcoming lower low on the 4-hour chart, and in our view, it signals the resumption of the prevailing downtrend. What’s more, the rate is trading below all three of our moving averages, which point south, something that adds to the negative picture of this pair.
Currently, the bears look to be heading towards the 80.55 support obstacle, marked by the lows of the 19th and 21st of April. If they prove strong enough to overcome it, then we could see the rate trading below 80.00 for the first time since November 2016, targeting our next support of 79.60, marked by the inside swing highs of the 18th of October and 10th of November 2016.
Looking at our short-term oscillators, we see that the RSI fell below its 30 line and still points south, while the MACD lies below both its zero and trigger lines, pointing down as well. These indicators detect strong downside speed and support the case for the pair to continue drifting lower, at least in the short run.
On the upside, a move back above 81.50 could aim for the 82.00 level or the tentative short-term downside line drawn from the peak of the 2nd of February. That said, as long as the rate remains below that line, we would treat any recovery as a corrective bounce. We would like to see a clear move above that line before we abandon the bearish case. Such a move could initially aim for the 82.75 level, the break of which could trigger more upside extensions, perhaps towards 83.50.
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Article written by Charalambos Pissouros, Senior Market Analyst at JFD Brokers
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