CAD/JPY Surges, Is More Upside in the Works?

CAD/JPY surged yesterday, breaking two resistance (now turned into support) barriers in a row. The pair is trading above a tentative upside support line drawn from the low of August 25th, and at the time of writing, it looks to be heading towards the peak of October 29th, where a clear break would drive the rate in territories last tested in April 23rd. So, having all that in mind, we would consider the near-term outlook to be cautiously positive.

A clear and decisive break above the high of October 29th, at around 83.56 may encourage the bulls to drive the battle all the way up to the peak of April 17th, at around 84.35. They may decide to take a break after testing that zone, thereby allowing the rate to correct back down. However, as long as it stays above the aforementioned upside line, we would see decent chances for another leg north and another test near 84.35. If that level gets broken this time, the advance may get extended towards the 85.17 barrier, which is fractionally below the high of March 1st.

Taking a look at our daily oscillators, we see that the RSI lies above 50, pointing up, while the MACD stands slightly above both its zero and trigger lines, pointing up as well. Both indicators detect upside speed and support the notion for this exchange rate to continue drifting north for a while more.

On the downside, we would like to see a clear dip below 81.75 before we start examining the bearish case.  Such a move would confirm the break below the pre-mentioned upside support line and could initially aim for the low of November 21st, at around 81.28. Another move lower could extend the slide towards the 80.80 zone, the break of which could set the stage towards the psychological zone of 80.00.

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