USD/CAD Technical Outlook
- USD/CAD reversal was extremely hard in-line with the risk trade
- Downward bias favored moving into next week
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USD/CAD Technical Outlook: Big Reversal Sets Up the Downside
USD/CAD spiked hard and reversed yesterday following the hotter-than-expected CPI print. This type of price action puts the downside in play moving forward. Not only did we get a major daily reversal, but we also are about to post a big weekly (barring a big rally today). As long as yesterday’s high (soon to become this week’s high) at 13977 isn’t exceeded it is likely the trading bias will remain bearish.
It is possible that we see a bit more bouncing around before heading lower, which would fill out a wedge pattern that has an overthrow involved in its development. When these form the breakout is typically in-line with the overthrow.
That is still a scenario having yet had the time to play out, and very might not. Either way, whether USD/CAD heads lower from here or fills out the pattern the outlook is bearish. Just one is more immediate than the other.
On the downside, the next big level of support doesn’t arrive until last week’s low at 13503. Given the magnitude in which USD/CAD and stocks, which have an extremely strong inverse correlation, fell it looks quite reasonable that we will see that low, if not worse.
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—Written by Paul Robinson, Market Analyst
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