CAD/JPY traded higher on Monday, breaking above the upper end of a symmetrical triangle that had been containing the price action since Jan. 24. The rate traded briefly above the key barrier of 90.80, which provided decent resistance between Jan. 28 and Feb. 4. However, it returned below that line. In any case, as long as the rate is trading above the upper end of the triangle, we would consider the short-term picture to be positive.
Even if the current setback continues for a while more, we see decent chances for the bulls to regain charge from near the upper end of the triangle. If indeed this is the case and we do see a rebound, we would expect a test near the 91.20 barrier, which is slightly above the high of Jan. 27, and it is marked by the inside swing low of Jan. 20. If that barrier is broken, we could see advances towards the 91.65 or 91.95 zones, marked by the highs of Jan. 20 and 19, respectively.
Turning our gaze to our short-term oscillators, we see that the RSI, although above 50, has turned down, while the MACD lies above both its zero and trigger lines but shows signs of topping as well. Both indicators detect slowing upside speed, and support the view for some further retreat before the next leg north.
To start examining the bearish case, we would like to see an apparent dip below the round figure of 90.00. The rate will already be below the lower end of the pre-discussed triangle, and the bears may initially get encouraged to push the action towards the low of Jan. 24, at 89.57. Slightly lower lies the 89.45 barrier, marked by the low of Dec. 28, the break of which could extend the fall towards the low of Dec. 24, at 89.10.
