CAD/JPY chart 4/18/2012" title="CAD/JPY chart 4/18/2012" width="672" height="439">The CAD/JPY is seen in the 4H chart trading in a declining channel since a previous rally stopped at 84.89 on 3/20. The market formed a double bottom with a low at 80.13, and followed through with a rally until hitting the channel resistance. Can the market break through the channel? There are some clues it has started the process to do so.
Consider that the 4H RSI reading has been held below 60 for the duration of the channel and has been tagging 30. This showed persistent bearish momentum. However, with the completion of the recent double bottom, the RSI reading has broken above 60 and kissed 70, a sign that the momentum is shifting. For a throw-back, if the market holds above 81.00, and the RSI can hold above 40 (preferably price above 81.20 and RSI above 50), we have a bullish market in development. Then if the market pushes above 82.50, and RSI goes back above 60, we have a confirmed bullish breakout with a scenario back toward the 84.89 high. A break below 81.00 however shows that the market is at most in sideways trading and a retest of the 80.18 low would be a likely scenario. CAD/JPY chart 4/18/2012" rel="noopener nofollow" target="_blank">
CAD/JPY chart 4/18/2012" title="CAD/JPY chart 4/18/2012" width="673" height="439"> The daily chart shows the significance of the support above 80.00. It was 38.2% retracement of the bull run since the 72.12 low from September 2011 to the 84.93 in March 2012. It was also the area of a previous support. Also consider that the RSI came down to 40 and if the bullish momentum is to be maintained, it should stay above 40 and push above 60. If it stays below 60, bullish price action would be limited to the 84.93 high.