CAD/JPY Technicals – CAD weakness threatening to unravel bullish momentum

Bullish advancement in CAD/JPY has not been as smooth as Canada’s North American counterpart USD/JPY. CAD has seen some volatility itself which caused a few bumps and pullbacks along the way. Ultimately, JPY weakness pulled through and we’re currently trading 1,200 pips higher than in Oct 2012. However, the latest IMF report card has stated that CAD can be afforded further interest rates cuts in order to bump up Canada’s economy, which has slowed in 2012. 2013 growth estimated is also capped at -2%, though 2014 is expected to improve. The most damming statement perhaps, lies in the fact that IMF found CAD being overvalued somewhere between 5-15%, which resulted in the tumble in CAD crosses across the board.

CAD/JPY was less affected due to the weakness in Yen, however that may soon change with JPY looking to strengthen soon in the short term. As such, we could be looking at a potential strong bearish reversal for CAD/JPY in the works.

4 Hourly Chart

Price has been posting lower highs, however lows have been kept constant by 92.0 round number and 38.2% Fib retracement. Stochastic is showing that a bear cycle is underway, though doubts remain how much this bear cycle may run especially with readings currently around 50.0 mark, which will accelerate lower should price continues lower at current pace. Also, there is a high likelihood that readings will enter Oversold region just as prices touches the 2 previously mentioned support. This will encourage bulls who will make it hard for price to break below the 92.0 levels.

Daily Chart

Daily chart suggest that the breakdown of bullish momentum is already underway, with price currently trading below the rising trendline after a Triangle has been formed from early Feb. Overall, trend is still bullish with price trading above current bullish Kumo.  Kijun-Sen (Red line) appears to be providing decent support for current price action, adding credence to the long-term bullish bias. However, Chikou Span (Cyan Line) is entering the consolidation zone which price is currently trading in, suggesting that bullish momentum has indeed faltered. Hence, bulls must certainly realize that a shift in fortunes may be coming in soon, even though currently advantage is still firmly on their side.

Keep a close watch on USD/CAD’s direction which has recently broke through a 3 month high, suggesting more CAD weakness and may help to push CAD/JPY lower in the near-term.

More Links:
USD/CAD – US Dollar Edges Higher after Solid Data
USD/JPY – Nothing new from BOJ Minutes

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