CAD/JPY Price Analysis: Bears moving in and eye 88.80s on break of 89.00

The yen is a top performer due to the uncertainty surrounding the coronavirus and how central banks intend to deal with the dire implications for their domestic economies. The yen is renowned as a safe haven currency which gives it an edge, especially over the high beta and commodity currencies, such as the Canadian dollar.

However, regardless of the fundamentals pertaining to the threat of the new coronavirus variant, the technical picture leans with a bearish bias, albeit within a trapped environment. The following illustrates this environment in a top-down analysis and arrives at a short term bearish thesis.

CAD/JPY daily chart

Firstly, from a daily perspective, the price is testing demand territory from which would be expected to hold on to initial tests throughout the week and potentially carve out a correction. The 50% mean reversion has a confluence of prior lows near 89.80. A break there will look for a test of 90 the figure and this would open risk towards a 61.8% golden ratio target of near 90.20.  On the other hand, the 89.50 could guard such a retracement where the 38.2% Fibonacci retracement is located.  

Meanwhile, however, there could be a shorter-term opportunity on the lower time frames as follows:

CAD/JPY 4-hour chart

From a 4-hour perspective, the price is carving out a symmetrical triangle at the bottom of a strong bearish impulse which is regarded as a continuation chart pattern. So the bias is to the downside and traders will be on the look out for a break of the dynamic support. 

CAD/JPY hourly chart

The hourly chart shows that the price is being resisted below 89.20 and following a 50% mean reversion of the latest bearish impulse, albeit with a sideways consolidation. This makes for a higher risk profile of the market structure, but bearish nevertheless for intraday scaling opportunities to the downside.  

CAD/JPY 15-min chart

The price has been rejected at the counter trend line on the 15-min chart, so the bears will be preparing to short below the support around 89.02. This can also be executed on the 5-min time frame as follows:

CAD/JPY 5-min chart

The failed inverse head and shoulders pattern is encouraging and a break of the 21-EMA again will raise prospects of a break of the support. Bears would expect that level to then work as resistance on a restest from which the price could deteriorate within the sideways hourly channel towards 88.80 or lead to an outright breakout of the 4-hour symmetrical triangle towards 88.30/40.