CADJPY has formed a double bottom pattern on its 4-hour time frame, a classic reversal signal from the previous downtrend. Price is now nearing the neckline at the 86.00-87.00 levels, with an upside break likely to confirm that an uptrend is underway.
Note that the chart pattern is around 700 pips tall so the resulting rally could last by the same amount, taking the pair up to the 94.00 levels. However, if the resistance holds, another move towards the bottom at 80.00 could take place.
RSI is on the move up so buyers are still in control of price action. However it is nearing the overbought area and so is stochastic so bulls might need to take a break and let sellers take over. Also, the 100 SMA is below the 200 SMA so the path of least resistance might be to the downside.
Still, the moving averages are inching closer together for a possible upward crossover, which might give bulls more reason to push price up. Crude oil trends could continue to give cues for Loonie price action, with more rallies and positive speculations likely to spur gains.
The Bank of Canada decided to maintain interest rates at their current levels of 0.50% and give an optimistic assessment of the Canadian economy. They noted that export levels are picking up and that crude oil has recovered as expected.
Meanwhile, data from Japan has been mixed so the yen could stand to lose further ground, especially if risk appetite stays in play. The latest preliminary machine tool orders report showed a sharper drop to indicate weakening business conditions.
Up ahead, the ECB statement could have a strong impact on overall market sentiment, with a return in risk aversion likely to force this pair to retreat.
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