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CAD features as the strongest currency on our strength meter but in a reversal zone. Could CAD begin to weaken now CADJPY is at key resistance?
Watch the video to learn more…
CADJPY Analysis
In a surprise move the Bank of Canada hiked interest rates from 4.50% to 4.75%. This was in the wake of some strong data including higher GDP figures, employment and CPI. CAD strengthened after seeing CADJPY prices rally into the key resistance level of 104.50.
However, is the price going to reverse here? On our strength meter CAD is in the reversal zone at +7. But we need the price to agree with our bias. Using multiple time frame analyzes and moving down to the H4 chart we can see price is forming a head and shoulders pattern.
The head and shoulders pattern commonly forms at areas of resistance and can lead to a change in trend. It forms when price forms a higher high followed by a lower high. Price confirms the pattern has formed when it trades through the lows also known as the neckline.
We can also add technical indicators to our charts to visually give us an idea of when the trend has reversed. For instance if the 20 moving average is below the 50 moving average we can expect the price to bearish. If price does turn bearish sellers could be looking to target the previous swing highs at 100.50.
CADJPY
The price on the chart has traded through multiple technical levels and some observations included:
- Price is trading at the key resistance at 104.50.
- H4 chart showing price forming a head and shoulders pattern.
- If price completes this pattern it could signal a price trend reversal.
Have you watched our interview with Week Ahead analysis? You can see it here.
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