CAD/JPY spiked higher during the Asian morning Tuesday, after it hit support near the 83.85 level. However, the advance was stopped by the crossroads of the 84.55 level and the medium-term downside resistance line drawn from the peak of the 5th of January. Although the price structure remains of higher peaks and higher troughs above the short-term uptrend line taken from the low of the 19th of March, the fact that the pair hit the aforementioned downside line takes us to the sidelines for now.
We would like to see a decisive break above that line and the 84.55 level before we get confident on more upside extensions. Such a break could initially set the stage for our next resistance obstacle of 85.20. Another move above 85.20 could have more bullish implications and perhaps pave the way towards 85.70.
Looking at our short-term oscillators, we see that the RSI hit resistance near its 70 line and turned down, but the MACD stands above both its zero and trigger lines. These conflicting momentum signs support our choice to stand flat for now. If we rely solely on the RSI, we also see that there is a negative divergence between the indicator and the price action, something suggesting that a corrective retreat may be on the cards, perhaps for another test near the 83.85 support line.
Having said that though, we prefer to wait for a dip below 83.50 before we assume that the bears have taken the driver’s seat. Such a dip could confirm a forthcoming lower low on the 4-hour chart, and perhaps see scope for downside extensions towards the 82.65 support or the uptrend line taken from the low of the 19th of March.
