CAD/JPY traded lower yesterday, after it hit resistance near the 86.60 zone. However, the slide was stopped by the 85.75 level and then, the rate rebounded. The pair continues to trade within the sideways range between 85.30 and 87.00, which has been containing most of the price action since the 10th of October and thus, we prefer to remain sidelined for now. That said, bearing in mind that the rate also holds above the medium-term upside support line drawn from the low of the 22nd of June, we would see slightly more chances for an upside exit out of the range, rather than a downside one.
If this is the case and the bulls manage to overcome the 87.00 key hurdle soon, then we may see them initially aiming for the 87.45 obstacle, defined by the peaks of the 9th and 10th of October. Another break above 87.45 may carry more bullish extensions and perhaps open the way for the high of the 8th of October, near the 88.00 territory.
Taking a look at our short-term oscillators, we see that the RSI rebounded, but hit resistance near 50 and then it flattened. The MACD lies slightly below both its zero and trigger lines but shows signs that it could bottom soon. These neutral signs suggest lack of near-term momentum and support our choice to stand pat until the rate exits the aforementioned sideways range.
On the downside, we would like to see a clear dip below 85.30, which is the lower end of the near-term range, as well as a break below the upside support line drawn from the low of the 22nd of June, before we start assessing whether the bears have gained the upper hand. Such a move could initially open the path for the low of the 26th of October, at around 84.85, the break of which could target our next support at 84.50, marked by an intraday low formed on the 11th of September.
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