CADJPY recently broke below its ascending channel on the 4-hour time frame to indicate that a reversal from the uptrend is due. Price found support around the 82.50 minor psychological mark and has since pulled up for a retest.
If the broken channel bottom holds as support, CADJPY could revisit the swing low that lines up with the 50% Fibonacci extension level. Stronger selling pressure could take it down to the 61.8% level at 82.26 or the 78.6% level at 81.78. The full extension is located at 81.17.
The 100 SMA has crossed below the longer-term 200 SMA to indicate that the path of least resistance is to the downside. In other words, the selloff is more likely to gain traction from here and resistance is more likely to hold than to break.
RSI is starting to turn lower from the overbought zone to signal a return in selling pressure. This oscillator has plenty of room to head lower before indicating oversold conditions, which means that sellers could have the upper hand for much longer. Stochastic is also in the overbought zone to reflect exhaustion among buyers and a possible return in selling pressure.
The Loonie is currently drawing support from rising crude oil prices on account of weaker shale production and restrictions on global supply, namely the OPEC output deal and US sanctions on Venezuela.
Meanwhile, the yen is also on weaker footing as risk appetite has been in play in financial markets, weighing on lower-yielding assets and currencies while propping up riskier ones. The BOJ also maintained its cautious stance as it warned that further yen strength might dampen inflation and warrant more easing.
There are no major reports lined up from both Japan and Canada next, so market sentiment or profit-taking might push CADJPY from here.