MNI MARKETS ANALYSIS: USDCAD Approaches A Major Support

USDCAD has been in a clear downtrend since the reversal off 1.4668 on Mar 19, 2020. The rejection at 1.4668 meant that the major resistance at 1.4690, the Jan 2016 high remained intact. The USD remains in a clear downtrend. However, the pair is approaching a major support at 1.2062 that will potentially either reinforce the current medium-term bear leg if breached or lead to a reversal if the support manages to contain CAD strength. The key technical features are:

• Looking at the monthly candle chart, there are two potential scenarios:
• The first is that USDCAD is trading within a broad channel, with the parameters defined by 1.4690 and the 1.2060 area. If over the coming weeks and months, a trend reversal is confirmed, this would suggest that in the next 12 - 24 months, USDCAD could strengthen potentially towards the 1.4000 handle and the beyond towards the top of the range.
• The second scenario is that activity since the 2016 high of 1.4690 is a broad double top reversal pattern. If correct, this would instead suggest that the long term downtrend remains intact and that this could result in a move to parity and below - based on the patterns price projections.



• As USDCAD approaches 1.2062, it is also clear that the downtrend is oversold. Any short-term recovery would initially represent a correction rather than a reversal. Looking at the point and figure chart we monitor to assess the trend in a market, the downtrend is clearly highlighted by the various trend components. A shift to bullish in this chart would be required to signal that a recovery in USDCAD represents a more meaningful reversal as opposed to a pause in the downtrend.



• As the USDCAD downtrend extends, watch 1.2062!