Hello traders! In continuation of the “JPY as a safe-haven” topic, today we will observe the CAD/JPY currency pair, which has already established a very strong downtrend. After the sharp fall occurred between Februarry 21, 2019, and March 09, 2020, CAD/JPY has initiated a consolidation phase. Price has been ranging between 73.86 support and 78.38 resistance levels, making it a 460 pip range.
But now we can start to see a bearish pattern once again. CAD/JPY started to print lower lows and lower highs. Besides, after rejecting the downtrend trendline it broke below the previous support at 75.31. For the past few days price has been correcting up, and today has reached 76.43 level, which is a 23.6% Fibonacci retracement applied to the initial wave down.
Perhaps this could be the starting point of the downtrend continuation if this resistance will hold. There are two downside targets where price could be heading in the next weeks and potentially months. First is the 71.00 psychological support, which is also confirmed by two Fibonacci retracement levels. First is the 161.8%, applied to the 09-13 March correction up. The second target is 361.8% retracement of the Fibs applied to the most recent correction. If the price will manage to break and close below the 71.00, the next downside target becomes 66.55, which is 261.8% Fibs. All-in-all, CAD/JPY seems to be getting extremely bearish once again, and this is for the long term.
On the other hand, the key resistance is seen at 77.26, where the downtrend trendline was rejected. When and if this price will be taken out by the bulls, only then we can speak of an uptrend. In this scenario, CAD/JPY will aim for the 78.38 resistance. And if this resistance gets broken, price should rise towards the 81.44 level, which is the point of the breakout of the ascending channel.
Bias: Strongly bearish while below 77.26
Potential Resistance Zone: 76.43 – 77.26
Potential Targets: 71.07, 66.55
Have a profitable trading!