Technical Analysis – CADJPY bulls flirt with 100-SMA after correction

Anthony Charalambous, XM Investment Research Desk

CADJPY bulls are pushing against the 100-day simple moving average (SMA), after a pullback rendered the end of the rally that commenced on August 26. The short-term reversal before the 82.10 level, which is the 76.4% Fibonacci retracement of the down leg from 83.22 to 78.48, was halted as its decline found support at the 50-day SMA.

The price seems to have started to consolidate, as the SMAs are converging and the price has found itself trapped between the 80.56 and 82.10 levels. The momentum indicators show that positive directional momentum is decreasing, concurring with the bigger view. The MACD has dropped below its red trigger line in the positive area, while the RSI has returned to the 50-level, marginally pointing up. However, traders cannot rule out a short-term positive rebound, as the 21-day SMA has completed a bullish cross, while the MACD and the RSI remain in bullish zones.

If the 100-day SMA manages to restrict upside momentum, the bears could find significant pressure from the nearby support region of 80.85 – 80.56. The region encapsulates the 21- and 50-day SMAs and holds the 50.0% Fibo also. If the bears surpass this, the 38.2% Fibo of 80.30 could play out ahead of price steering towards a test of the 23.6% Fibo of 79.60.

To the upside, if the bears dominate the 100-day SMA, resistance comes from the neighboring 61.8% Fibo of 81.42. Overcoming it could rally the price to test the more durable resistance of 82.10, which is the 76.4% Fibo, and where the swing high and 200-day SMA reside.

Overall, the medium-term bias is bearish. Yet in the short-term a close below 80.56 or above 82.10 would indicate the directional bias.