CADJPY could be in for a reversal from its selloff, as price is forming a double bottom pattern. Price failed in its last couple of attempts to break below the 88.00 handle and is about to test the neckline resistance around the 90.00 mark.

A break above this level could confirm that the pair is in for a rally that’s the same height as the chart pattern, which spans 200 pips. Price is already breaking above the 200 SMA dynamic resistance as an early indication of bullish pressure.

However, the 100 SMA is below the 200 SMA for now, so the path of least resistance is to the downside. In other words, there’s still a chance the neckline could keep gains in check and spur a move back to the support at the bottoms.

Stochastic is on the move down, so price could follow suit while sellers are in control. The oscillator has plenty of room to slide before indicating oversold conditions. Similarly RSI is just making its way down from the overbought level to suggest that sellers are starting to take over.

There’s not much in the way of top-tier reports from the US or Canada this week, and liquidity is thin since most traders are off enjoying the holidays. Still, any major headlines might have a strong impact on sentiment and spur volatile price action.

Risk appetite appears to be in play lately, as reports are suggesting that economies are shrugging off the impact of the Omicron variant. Business and consumer activity stayed afloat for most of the holiday season, although the repercussions might not be apparent until early next year.

Crude oil is also staying supported as demand for fuel and energy commodities remained elevated, despite tighter restrictions in some countries. This could keep the correlated Loonie bullish versus the safe-haven dollar until any major market shift happens.