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The Canadian dollar currency is starting to rebound towards the 89.00 level against the Japanese yen, as a recovery in oil prices and a decrease on risk-off sentiment give the pair a welcome boost.
Last month the CADJPY pair threatened to break to the upside and swiftly retreated as a major sell-off in Crude and Brent oil hurt the Canadian dollar currency, which is effectively a commodity-related, and heavily oil related currency.
The oil market looks like it formed a major bottom this week, in what looks like a healthy correction from the best levels of the year. President Biden is reported to be meeting with OPEC leaders to ask for a production increase to try to bring down the price of oil further.
Analysts familiar with OPEC noted that Biden is likely to be out of luck, and that OPEC members are likely to remain resolute in their commitment to keep production capped, in order to maintain the current price levels. This should be bullish for oil prices.
From a technical perspective the USDCAD pair is close to staging a breakout from a large broadening falling pattern. These types of patterns often signal explosive upside breakouts, so the CADJPY pair is one to work.
It should be noted that retail sentiment data currently shows that there is a major one-way bearish skew towards the CADJPY pair right now. The ActivTrader Market Sentiment tool shows that some 82 percent of traders are bearish towards the CADJPY pair right now.
This is very encouraging for those finally looking for a bullish breakout in the CADJPY pair. Historical data has shown that fading one-sentiment skews often yields strong gains and offers reliable counter signals.
CADJPY Short-Term Technical Analysis
The four-hour time frame shows that the CADJPY pair is trading close to the top of a descending broadening expanding wedge pattern, which is one of the most bullish reversal patterns.
Looking closer at the pattern the top of wedge pattern is located around the 89.20 level. This pattern indicates that a 300-point move will take place once the price breaks from the wedge pattern.
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CADJPY Medium-Term Technical Analysis
Looking at the daily time frame the CADJPY pair has further scope for upside price advancement, while technical indicators such as the RSI and CCI indicators are bullish.
According to the Commodity Channel Index indicator, a new buy signal was generated this week, as a consistent above 100 reading usually indicates the overall uptrend is starting to strengthen.
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