Technical Sentiment: Bearish
Key Takeaways
• CAD/JPY range broke towards the downside;
• Immediate support is located at 92.25;
• Gloves come off below 92.25 where volatility will inevitably increase.
On 14th April CAD/JPY completed a 61.8% Fibonacci Retracement for March-April bullish swing. The technical bounce was short lived however, and the pair entered a perfect range between 92.57 and 93.27, with multiple confirmations for both levels. The potential of the range break-out may be severely limited by April’s Low.
Technical Analysis
Usually, a perfect range formation should not be taken too lightly, especially when price finally breaks outside its boundaries. Yet when all things are considered, CAD/JPY bearish break-out should be treated with extreme caution, as traders may be looking to test the 92.25 support before launching back up.
Price crossed below the 50-Day Moving Average and the 200 Simple Moving Average on the 4H. The real confirmation for a bearish continuation will come on a break and consolidation below 92.25, 61.8% Fibonacci Retracement and April’s Low. This would open the way lower, towards 91.20 and ultimately 90.64.
Stochastic is entering oversold territory on 1H, 4H and Daily. A second Fibonacci bounce at 92.25, preferably coupled with bullish price action signals, would immediately bring back the bullish factor and target 93.25 as a result.
Support levels: 92.25; 91.20; 90.64.
Resistance levels: 92.56; 93.25; 93.89; 94.86.
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Prepared by Alexandru Z., Chief Currency Strategist at Capital Trust Markets