USD/CAD has recovered from a recent 1.2494 decline, settling at a 1.2896 high. However, technical indicators and seasonality studies hint the pair may need a corrective decline before it finds fresh oxygen to challenge higher levels, Benjamin Wong, Strategist at DBS Bank, reports.
“There are hints from the technical indicators that the USD rally requires a pause before it finds fresh oxygen to continue its rally higher. Noticeably, the pair is close to the 38.2% Fibonacci retracement of the range drop from 1.4668 to 1.2007 at 1.3024; and a clear resistance confluence hosted by 100 and 200-week moving averages at 1.3046 and 1.3067, respectively.”
“The seasonality charts show CAD enjoys bouts of strength into the October and November months.”
“The price action appears to be contouring a bullish inverted head-and-shoulders pattern where any USD decline is merely filling the rungs of its right shoulder. Eventually, as major support levels hold up, USD/CAD would still revert higher in the medium-term.”