CAD/JPY surged last Friday, breaking above the long-term downside resistance line drawn from the high of October 3rd, last year. The rally continued this week as well, with the rate almost hitting the 82.83 zone, which is defined as a resistance by the high of July 31st. What’s more, the pair is also trading above a short-term upside line drawn from the low of August 28th, which combined with the aforementioned break above the long-term downside line paints a cautiously positive picture.
Having said all that though, we would like to wait for a strong break above 83.24 before we get confident on larger upside extensions. That barrier provided strong resistance back on May 1st, as well as on July 12th. Such a break is likely to trigger extensions towards the peak of April 17th, the break of which may allow the bulls to push towards the 85.25 zone marked by the peak of March 1st.
Taking a look at our daily oscillators, we see that the RSI stands above 50, slightly below 70, while the MACD lies above both its zero and trigger lines. Both indicators detect positive momentum, but taking into account that the RSI is moving sideways near its 70 barrier, adds to our choice to wait for a clear break above 83.24 before we get confident larger bullish extensions.
On the downside, we would like to see a decisive dip below the psychological number of 80.00 before we start examining whether the bears have gained back control. Such a dip is likely to initially aim for the low of September 3rd, at around 79.17, the break of which could extend the slide towards the low of August 25th, near 78.50.
