USD/CAD Technical Outlook
- USD/CAD is overbought as it heads into a level from 2020
- Stocks have yet to capitulate, but we may see a bounce develop around June lows
USD/CAD Technical Outlook: On Reversal Alert in the Near-term
USD/CAD has run nearly 9 figures in two weeks with the dollar generally ripping and stocks selling off. The momentum the past couple of sessions is beginning to show signs of faltering as overbought conditions hold the pair back.
There is a meaningful level to watch from 2020 just above the overnight high. The area right around 13850 had significant meaning over a six week stretch during April and May of 2020. It acted as a floor as a descending wedge formed before price finally broke hard.
This makes that spot a very important one to watch as price gets extended into it. The dollar and stocks will need to reverse course a bit for a meaningful reversal to happen, but the signposts are there for USD/CAD to come off from resistance.
Speaking of stocks, the S&P is trading around the June lows and momentum is beginning to shows signs of slowing, which could lead to a bounce in stocks. The thinking is that we haven’t yet seen a real low put in, but bounce risk around old lows, even in a bear market, is high.
Weakness could sink USD/CAD 2-300 pips quickly even if only a pullback given the size of the run with no retracement. Ideally, for this to set up we see a spike into or above 13850 that fades off and posts a reversal candle.
USD/CAD Daily Chart
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---Written by Paul Robinson, Market Analyst
You can follow Paul on Twitter at @PaulRobinsonFX
