It’s easy to spot a couple of bullish signals – followed by positive gains all week round – and believe a downtrend has changed it’s direction.
In CAD/JPY’s case, while the first bullish signals were obvious, starting with the double bottom at 90.64 and continuing with a cross over the trendline based on March highs, it’s important to underline that up to 92.22 the pair was still technically bearish.
The most recent swing high in this month’s downtrend is at 92.22. This level coincides with the 200 Simple Moving Average on the 4h timeframe, a line usually depicting the separation between the bearish and bullish territory.
Up until now CAD/JPY has only retraced the last bearish swing. With a bullish break and close above 92.22, the pair would finally confirm the bullish trend. It should be noted that there is a secondary resistance nearby at 92.44, a confluence between February’s pivot zone and the trendline from January, which may still cause small rejections in the short term.
Failure of confirmation for the bullish trend will lead CAD/JPY to pull back towards 91.50, possibly even 90.64, to test the main support levels. With a double top at 92.22 and a double bottom at 90.63, the pair will technically be in a range between these levels.
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Prepared by Alexandru Z., Chief Currency Strategist at Capital Trust Markets