The currency pair CADJPY – the exchange rate of the Canadian dollar to the Japanese yen has been moving in an uptrend since March 2020.
- CADJPY in a strong trend
- the bearish engulfing at 2.5-year highs
- oil price weakens the canadian dollar
Between June 2020 and February 2021, quotations moved in a fairly wide consolidation of over 400p. The breakout of the resistance level of the consolidation was the impetus for strong increases, which reached the level of 88.08 on Thursday 18.03.
After the 2.5-year maximum was established, the price started to fall sharply. The responsible for such price movement was the Canadian dollar losing to the USD, which in turn was influenced by falling oil prices.
As we know, CAD belongs to the commodity currencies and is strongly dependent on oil prices. Currently on USDCAD we have a bullish engulfing pattern, which suggests further weakening of CAD in the following sessions.
The aforementioned sharp Thursday declines resulted in a strong bearish candle on the CADJPY chart, which formed a bearish engulfing pattern.
Friday’s trading was not able to break out of the formation successfully, the price is still above the minimum of the candle forming the bearish pattern.
The MACD has entered a downward phase signalling the advantage of supply and further declines are very likely. When an inside bar appeared in June 2020 and the MACD started to decrease, the price dropped 380p… ( see D1 chart) will the situation repeat itself?
Using the H1 chart, we may be able to determine the range within which the CADJPY price may move in the coming sessions. A local S/R level (support and resistance) was formed at 87.70 – its overcoming may negate the downward scenario.
However, if the price successfully overcomes 86.87 which seems very likely – declines may reach the demand zone located 100p lower at 85.80.
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