The Canadian dollar versus the Japanese yen currency pair corrected sharply and, as a consequence, some might already think of shorting it. But is it the pair really ready to give the bears a new go?
After confirming the resistance of 85.12, the market entered a downwards movement that bottomed, at least for now, at the 78.49 low. So, for the easy eye, this could look like a casual correction of a descending trend. Of course, that is not so.
The first sign of an impending change unfolds as follows. Starting from August 7, the market consolidated under the psychological level of 80.00. To this adds the August 13 false piercing. The consolidation and the false break give a combined message that the bears are in control. So, as a testimony, the market continues with a movement to the south on August 23. But the next candle engulfs it and also prints the 78.49 low. This was a first warning that the bears just might not be as well-positioned in the market as they would like to.
And then came the second trouble, as on August 30, the market confirmed the double resistance inscribed by the lower line of the descending channel and the 80.00 resistance only to get stopped on its track by the September 4 strong bullish candle, that promoted the rally which got the price above the long-term solid support area of 81.38.
So now, the price is above an important support area, 81.30 respectively, and this after a failed attempt from the bearish side to get the prices lower when they had all the chances.
This means that the bulls are leading. And as they are willing to drive the market higher, what they should look for is a good support to continue from. And that support is 81.38.
So, as long as 81.38 is confirmed as support of falsely pierced, 82.71 is in the cards and 83.81 in reach.
The rally that started after the confirmation of 80.64 as support is taking a pause in the form of consolidation.
As there could be said that a bearish diamond pattern is forming, such a development cannot be ruled out, as the market — in the light of the discussion for the daily chart — might descend in the search for a support to start a new rally from.
So, as long as the 81.37 low or the 81.11 level (accompanied by the correspondent 80.00 psychological level) is falsely pierced or confirmed as support, the pair is expected to target 82.43, followed by 82.94.
Levels to keep an eye on:
D1: 81.38 82.71 83.81
H4: 81.11 81.37 81.77 82.43 82.94
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