CAD/JPY fell yesterday after the soft Canadian GDP data which showed essentially no growth in July. In the 4H chart, we can see that this decline was within the context of a consolidation between 97.70 and 98.72. The pair remained within this range after the GDP-reaction.
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The consolidation follows a retreat from 99.81. Before that the market was bullish, evidenced by price action, moving averages, and even the RSI in the 4H chart. 96.50 was the previous key low, and price is trading above that. It is even holding above a previous resistance pivot around 97.70 showing that bulls are still in charge. The 200- ,100-, and 50-period SMAs are in bullish alignment. The RSI has tagged above 80, and is holding above 40 despite cracking it a couple of times. The bullish momentum is therefore barely but still maintained.
If there is a break below 97.70, CAD/JPY still has a chance to remain bullish if it avoids breaking 95.50. If it can also hold above the 200-period SMA which is now around 96.75, there would still be bullish bias. We should therefore limit any bearish outlook resulting from a breakout, to 96.75 for now.
If CAD/JPY breaks 98.75, it should simply continue the prevailing trend, which is bullish, and open up the 99.81 high, with potential of reaching toward 100, which would open up fresh highs on the year.
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When we look at the weekly chart, we can see that the CAD/JPY has been in consolidation since May of 2013. With that in mind, let’s limit the bullish outlook to 101, near the 2013 high of 101.04. With the weekly chart pushing at overbought condition, and the trend neutral since 2013, we should anticipate some resistance and at least some short-term consolidation around 101.
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