CADJPY formed lower highs and lower lows to create a new descending channel on its 4-hour time frame. Price is finding resistance at the 61.8% Fibonacci retracement level and might be ready to resume the slide.

If so, CADJPY could fall back to the swing low at the 78.00 major psychological mark or the channel support. The 100 SMA crossed below the longer-term 200 SMA to confirm that the path of least resistance is to the downside or that the selloff is more likely to resume than to reverse. The moving averages are holding as dynamic inflection points as well.

Stochastic is pulling up from the oversold region to indicate that bullish pressure is returning, possibly allowing CADJPY to recover to the channel top closer to the 80.00 handle. RSI is also pulling higher after making it halfway down from the overbought zone.

Risk appetite lifted the Canadian dollar in the previous week as markets breathed a sigh of relief after the US elections. However, profit-taking could ensue as traders turn their focus to the uncertainties related to the transition of power.

There are no major reports due from the Canadian economy or the Japanese economy in the days ahead, so the ongoing trend could simply carry on. A return in risk-off flows could be negative for the Loonie, as well as crude oil, while at the same time being bullish for the Japanese currency.

Crude oil price action might determine where the correlated Canadian dollar is headed in the coming days, with the focus mostly on inventory data from the Department of Energy and the potential for more business restrictions related to COVID-19. A likely drop in trade and travel activity could bring in losses for the commodity while easing restrictions could mean more gains.