The long term trend line resistance that we noted in last week’s post capped the rally in in CAD/JPY as anticipated. The pair also faced resistance at its 100-day simple moving average and 61.8% Fibonacci retracement of the decline from Oct. high to Nov. lows. It has since moved lower and approaches the convergence of the 21- and 55-day SMA’s as well as the 50% retracement (of the rally from Nov. lows to Dec. highs). These levels converge around 75.40/50 and may serve as an initial support level. A break below here would suggest further downside with the Nov. lows of around 73.50 as the next visible support zone. The daily RSI indicator also points to a bearish bias as the indicator was recently rejected from a horizontal resistance. A move below the 50 level would add to the bearish technical picture. We maintain our view that “while the 77.10/30 area holds as resistance, we would anticipate a further decline in CAD/JPY is an initial move towards the 21 and 55-day SMA’s around the 75.50 zone. A sustained break above the 77.30 level would negate this view”
