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USD/CAD Technical Outlook is Bearish Based on Chart Formation

USD/CAD Technical Outlook is Bearish Based on Chart Formation

Paul Robinson, Strategist

USD/CAD Technical Outlook

  • USD/CAD H&S pattern is in play, but may not be a clean trade
  • Taking a pullback vs momentum approach
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USD/CAD Technical Outlook is Bearish Based on Chart Formation

On Friday between the US and Canadian jobs report USD/CAD got slammed. The dollar was broadly weak following a knee-jerk reaction higher on better than expected data. This adds more fuel to further losses as the market once again (similar to CPI) shrugs off data that would suggest we should see dollar strength.

At any rate, the down-move has important support in focus around the 13500-area. This is where a couple of lows were created during October, which make up the ‘neckline’ of the ‘head-and-shoulders’ pattern.

The height of the pattern suggests we could see a move down to around 13100, but I will look to actual levels of support and how those are treated for signaling as to how far down USD/CAD may drop. There are some minor levels near 13400 from 2020, but those are not expected to be that meaningful.

There is also a trend-line not too far beneath there that dates to August, but it only has the bare minimum requirements to be a trend-line and has yet to be confirmed. Perhaps that happens soon with more selling.

The level that stands out at this time is the July high that was then tested in September before the big breakout that occurred that same month. That lies near 13200. At this time that will be the level of most interest on this end.

It’s USD/CAD, so the trade could be a bit bumpy as momentum moves can be cut short with countertrend zig-zags before resuming. On that, selling rallies is the preferred approach versus momentum entries on breakdowns.

To turn the picture around in the near-term a strong break and rebound of support will be needed, something that doesn’t look likely at the moment.

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USD/CAD Daily Chart

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USD/CAD Chart by TradingView

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---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.