Did you know that CAD/JPY has been trading in an uptrend since mid-December 2023?
If you’re feeling FOMO and want to jump in, don’t worry. We gotchu!
Let’s take a closer look at the 4-hour time frame:
CAD/JPY 4-hour Forex Chart by TradingView
As you can see, CAD/JPY recently visited new 2024 highs above the 110.00 psychological handle before encountering sellers.
We know from the latest Bank of Canada (BOC) decision that the central bankers aren’t actively thinking about interest rate hikes. In fact, there’s reason for some traders to price in lowkey aggressive rate cuts from Governor Macklem and his team this year. Meanwhile, talks of the BOJ possibly turning hawkish has boosted JPY demand.
Remember that directional biases and volatility conditions in market price are typically driven by fundamentals. If you haven’t yet done your fundie homework on the Canadian dollar and the yen, then it’s time to check out the economic calendar and stay updated on daily fundamental news!
CAD/JPY’s downswing has taken the pair to the 109.25 area, which lines up with a trend line support that hasn’t been broken since mid-December 2023. Not only that, but the 109.00 – 109.25 zone is also near the 4-hour chart’s 100 SMA and the S1 (108.73) Pivot Point level.
A parade of bullish candlesticks from the trend line could attract trend traders and CAD buyers. A move to the 110.00 – 110.40 previous highs could be on the table if the bullish candlesticks also gain momentum.
But what if CAD/JPY isn’t done losing pips?
CAD/JPY bears can wait for a clear break below the trend line that we’ve marked. Consistent trading below the trend line and the 100 SMA opens the pair to a possible move to the 108.00 zone if not the 107.50 potential area of interest.
What do you think? Will CAD/JPY extend its uptrend? Or will the pair’s recent downswing lead to a longer-term bearish reversal?