CADJPY has weakened substantially since November last year and has over the last weeks bounced higher from a support at 91.78. The support is loosely defined by the lower Bollinger Bands and a pivot candle from March 2014. Last week price reacted lower from a weekly low creating a shooting star candle and confirming a resistance level at 96.74. A couple of weeks ago the pair bounced from 94.17 forming a support level.
CADJPY, Daily
There was a shooting star last week in the daily chart as well. CADJPY has since then moved sideways between resistance at 96.74 and a rising trendline. The resistance coincides roughly with 38.2% Fibonacci level (drawn from December 2014 high to the January 2015 low) and upper Bollinger Bands. Bollinger Bands are narrowing which indicates that the pair is nearing a breakout but to which direction? The last two days indecision is clearly visible in the chart. Stochastic Oscillator is close to being oversold and is about to cross over its signal line. This together with the rising trendline encourages the bulls but the above shooting stars and resistance that are relatively close dampens the enthusiasm.
CADJPY, 240 min
The pair has been making lower highs and breaking support levels since the move to 96.74 was rejected. Fluctuations created a triangle that was resolved to the downside and provided one shorting opportunity on a rebound as the pair tested the lower end of the triangle and failed to penetrate it. Since then we have had a new lower low and lower high as the pair has been moving towards the lower end of the range. Projection from triangle points to 50% Fibonacci level (near 94.17 support). Should that support fail the next interesting support level is at 93.03 as it coincides with a 261.8% Fibonacci extension. I have left the extension levels off from the chart to improve readability.
Conclusion
Trading in the middle of the range is always tricky while the easiest money is made at the edges and the pair is currently trading pretty much in the middle of the range. However, the weekly and daily shooting stars at 96.74 resistance level indicate willingness to sell the CADJPY at those levels while the lower highs and lower lows in 4h chart suggest that the pair should be testing the 94.17 level in not so distant future. This far the 38.2% Fibonacci level and the rising trendline have prevented the price moving lower. In addition there was bullish divergence in the Stochastic Oscillator at the time the pair bounced higher from the trendline. The intraday picture therefore has both bullish and bearish elements while the weekly shooting star points to lower prices from current levels.
The wide range candle from the beginning of February indicates that demand between 91.78 and 94.17 was strong. Quick moves into this area should be therefore met by willingness to bid the pair higher. Should such a quick move happen I would be interested in long signals at or near to the 93.03 support. I will be monitoring the levels close to the upper daily Bollinger Bands (at around 96.20) and the shooting star high.
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Janne Muta
Chief Market Analyst
HotForex
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.