On Friday the CADJPY broke below the 84.60 handle. This level supported the pair on December 5th of last year but had more recently attracted buyers on February 28th and March 9th.
Today’s high of 84.61 illustrates a retest of this area as new resistance. And last week’s breakdown suggests that we could see prices continue to slide lower over the next few sessions.
However, there is an area of support not far below the current price that I’m keeping a very close eye on. The 83.55 handle is the intersection of descending channel support and a horizontal level that played a crucial role between February and June of last year.
The 83.55 level is also the 38.2% Fibonacci retracement when measuring from the 2016 low at 74.80 to the high at 88.91.
If we compare the descending channel below to last year’s rally, the price action since mid-December does appear to be corrective. As such, I’m currently labeling the structure a bull flag, which could generate an impressive move higher over the coming weeks and months.
But the key word there is could. While the past five months of price action looks relatively bullish, we won’t have any concrete answers until buyers manage a close above channel resistance.
As for the 83.55 area, I’ll be watching for bullish price action should we get a retest over the next few sessions. Of course, another option is to wait for the pair to break consolidation first, but with a 300 pip range that may not happen for quite some time.
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