Featured Trade: CAD/JPY potential bearish breakdown

Further potential downside ahead for CAD/JPY

Short-term technical outlook on CAD/JPY (Thurs 15 Nov)



Key elements

  • From its 01 Oct 2018 swing high area of 89.20, the CAD/JPY cross pair has failed to make any upside headway after it stalled right below the pull-back resistance of the former ascending trendline support from 09 Nov 2016 swing low area and started to trade lower (see daily chart).
  • Right now, the recent decline has led to cross pair to hover just above the 85.37 ascending trendline from 19 Mar 2018 low while the daily RSI oscillator has staged a bearish breakdown below a significant corresponding support at the 50 level. This observation suggests that medium-term downside momentum has resurfaced which indicate a potential presignal of a price breakdown below the 85.37 ascending trendline support from 19 Mar 2018 low (see daily chart).
  • The key short-term resistance stands at 86.00 which is defined by the former lower limit of the recent “minor triangle range” bearish breakdown and the descending trendline in place since 09 Nov 2018 high.
  • The hourly Stochastic oscillator has not yet reached an extreme oversold level.
  • The next near-term support to watch after 85.37 rests at 84.85 which is defined by the 26 Oct 2018 swing low area and a Fibonacci projection cluster.

Key Levels (1 to 3 days)

Intermediate resistance: 85.85

Pivot (key resistance): 86.00

Supports: 85.37 (trigger) & 84.85

Next support: 86.90/87.00

Conclusion

In the short-term (1 to 3 days), the CAD/JPY may see further downside pressure ahead below the 86.00 key short-term pivotal resistance for a push down towards 85.37 and a break below it opens scope for a further potential drop to target the next support at 84.85 in the first step.

However, a clearance above 86.00 invalidates the preferred bearish scenario for a squeeze back up to retest the minor range resistance of 86.90/87.00 in place since 17 Oct 2018.

Charts are from eSignal



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