In today’s video, we are going to look at why we believe CAD/JPY will be breaking out soon and where we think it will continue rallying to.
The 4H CAD/JPY chart shows a bullish market at least since the March low of 93.74. After hitting 96.69, and developing a bearish divergence, it retreated, but held above the 50-period SMA. This is a sign that bulls are still in charge.
Another sign the market is still bullish is that the RSI held above 40 after tagging 70. What you also see is that the bearish divergence has now turned into a bullish reversal signal, where the RSI low is lower, but the corresponding price low is higher.
Combine these technical signals with the current bullish engulfing candle and we have a lot of pressure on the 98.70 high.
The daily CAD/JPY chart shows that the market has already bottomed after finding a low on the year at 91.73 on 1/29. The RSI has pushed above 60, which shows loss of the prevailing bearish momentum. Price is above the moving averages so, no more bearish bias.
The current rally looks poised to test the 99.80 pivot up to the 100.00 psychological level. We should anticipate at least some short-term resistance especially if the daily RSI is back above 70, and especially if there is a bearish divergence.
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