CADJPY Reversal Pattern Breakout

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CADJPY broke out of its inverted head and shoulders formation to confirm that a reversal from the slide is underway. Price is retesting the broken neckline, which appears to be holding as support.

In that case, the pair could aim for the next upside targets marked by the Fibonacci extension tool. The 38.2% level is close to the 83.00 major psychological mark and the 50% Fib lines up with the swing high, so either could serve as near-term profit targets. Stronger bullish momentum could take CADJPY to the 61.8% level at 83.15 or the 78.6% level at 83.30. The full extension is close to the 83.50 minor psychological mark.

The 100 SMA is above the 200 SMA to confirm that the path of least resistance is to the upside or that the climb is more likely to gain traction than to reverse. Price is also finding support at the 100 SMA dynamic inflection point.

RSI is turning higher to confirm the presence of bullish pressure. The oscillator has yet to cross the center line to signal a pickup in momentum. Similarly, stochastic has room to climb before hitting the overbought zone to signal exhaustion among buyers, which suggests that the rally could have a lot of ground to cover from here. Note that the chart pattern spans around 81.60 to 82.60, so the resulting uptrend could be of at least the same height.

The Loonie is enjoying strong gains at the moment on account of improved data from Canada, higher crude oil prices, and a general improvement in sentiment.

Easing coronavirus fears appear to be keeping riskier assets supported somewhat while expectations of output cuts are also boosting oil prices. On the flip side, the safe-haven yen is giving up ground as risk appetite could pick up on speculations that the coronavirus outbreak could be contained.

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