CAD/JPY fell off the cliff yesterday after US President Trump threatened to impose fresh tariffs to the remaining Chinese products imported to the US. The tumble brought the rate well below the prior upside support line drawn from the low June 3rd, and although it bounced somewhat from near 81.07, it came back under renewed selling interest today, with the bears overcoming that temporary support.
In our view, the bears could stay in charge for a while more and perhaps push the battle towards the 80.56 barrier, which is marked by the low of June 18th. The bears may decide to take a break near that zone, thereby allowing the rate to rebound somewhat. However, as long as such a potential recovery remains below 81.07, we would still see decent chances for another leg lower. If the second leg bypasses the 80.56 support zone, then we may see the fall extending towards the 80.20 level, marked by the low of June 4th, or the psychological round figure of 80.00, which is near the low of the previous day.
Taking a look at our short-term oscillators, we see that the RSI, already within its below-30 zone, hit the 30 line from underneath and turned down again. The MACD lies well below both its zero and trigger lines, also pointing south. Both indicators detect strong downside speed and support the notion for some further declines in CAD/JPY.
On the upside, we would like to see a break above 81.40 before we start examining the likelihood of a decent recovery in the latest tumble. Such a break may allow bullish waves, perhaps towards the inside swing low of July 3rd, at around 82.00, or the 82.15 territory, which provided decent support on July 22nd and 23rd.
