CAD/JPY is back in a bullish mode in the four-hour chart as Tuesday’s rally helped the market to break the range-bound trading started in mid-July and peak at a two-month high of 86.11 early today. While the MACD suggests that the market could maintain bullish momentum in the short-term as the indicator continues to gain strength above its red signal line in positive territory, the RSI, which moves in overbought territory above 70, warns that downside corrections are possible.
Should the price head lower, traders could look for support around 85.74, where the market found resistance between July 12-19. Even lower, the market could touch the 20-period (simple) moving average (SMA) at 85.36 before it retests the 85.00 round level which could be of psychological importance. A substantial close below the July 24 low of 84.24, however, would clearly resume the bearish outlook in the market.
On the upside, additional gains could try to overcome today’s high of 86.11 to reach the top of 87.08 (May 22), the highest level touched since early February. Further up, the attention would turn to the area around 88.00, a frequently approached zone between October and February.
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