The bounce higher from recent 1.2007 lows aligns with a multi-year rectangular support plane that previously gelled 1.2062-1.1920 support levels. This clearly has ended the 18.1% USD decline from March 2020’s 1.4668 peak. As Benjamin Wong, Strategists at DBS Bank notes, a technical pattern shows potential of prolonged CAD weakening.
Potential prolonged USD basing in play
“Looking at the weekly chart, the decline to 1.2007 and consequent stabilising reminds us of the rectangular support from the prior 1.1920 (May 2015) and 1.2062 (September 2017) key bottoms. If this holds, the potential for prolonged CAD weakening remains a plausible path.”
“The recovery so far has taken on a bullish MACD (moving average convergence/divergence) turn-up as the standard deviations measure also flag USD bottoming signs. Using its moving average guidance, USD/CAD nonetheless has yet to surmount the key moving average at 1.3112 – a reminder that USD/CAD’s movements are often chunky.”
“USD/CAD now sees a minor 1.2487-1.2495 double top, as it runs smack into the 76.4% Fibonacci retracement of 1.2653 (late April minor top) – 1.2007 (major bottom) at 1.2501. For a clean breakout to turn this aside, USD needs to thrust and sustain gains over 1.2515-1.2532. Pushing through, it would invalidate the minor double top easily.”
“The Ichimoku daily chart now pegs 1.2270 Kijun support, and that should be a pivotal level to monitor in the near-term.”