Technical Sentiment: Bullish Key Takeaways
Markets were off to a very slow start this week, with most pairs moving in accordance with their bias from late last week. Traders remain bullish on CAD/JPY, facing immediate resistance in the shape of the 200-Day and 100-Day Simple Moving Averages. Reactions around this resistance cluster will define the overall direction of the pair in the short term.
Ever since the double bottom reversal pattern formed in the 1st first quarter of this year, traders have obeyed the rule of the uptrend without fail, frequently pricing in higher highs and higher lows while capping corrections at the 61.8% Fibonacci mark. With CAD/JPY bouncing off 92.77, 61.8% Fibonacci retracement level from the Low of 90.64 to the High at 96.22, we can assume the 5-week long correction swing from July has come to an end.
Price action confirmed the Fibonacci bounce last week; when a break above the resistance trendline (93.63) went on to test the 200-Day SMA (94.17) and 100-Day SMA (94.40) before crashing back down to 93.5. Buyers are currently having another go at breaking above this natural resistance area around 94.10/20. If they succeed, with a firm daily close above this area, CAD/JPY will stabilize in bullish territory and upside potential opens up all the way up to 96.22, with 97.50 representing a viable option for a future Higher High.
Failure to exceed this resistance will most likely result in a choppy consolidation area between 92.77 and 94.10, without any major trade scenarios besides remaining short while CAD/JPY is below the 200-Day Moving Average.
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Prepared by Alex Z., Chief Currency Strategist at Capital Trust Markets
