USDCAD’s recent climb might soon turn since a forex reversal pattern can be seen on its 1-hour time frame. The pair has created a head and shoulders pattern recently and may be due to break below the neckline soon.
The formation seems to be a more complex one, as the price is finding difficulty to break below the neckline around the 1.2350 minor psychological support. If that happens, the pair could head lower by around 500 pips, which is the same height as the chart pattern.
Forex Reversal Forecast
If price is unable to break below support, the pair could bounce back to the previous highs around the 1.2800 handle sooner or later. The latest jobs reports from US and Canada suggest that the path of least resistance is to the upside, as the former showed stronger hiring trends while the latter saw weak spots in underlying data.
There are no event risks for this forex reversal setup today, indicating that the previous trend might carry on or that price could consolidate. Loonie price action could hinge on oil price movements today, as the commodity recently showed signs of bottoming out. If so, the Loonie could enjoy stronger demand if risk appetite also picks up.
Data is also light for the rest of the week, as traders could focus on risk sentiment for the next few trading days. A downside break from the forex reversal pattern could mean a selloff of as much as 500 pips, which is the same height as the chart formation. If the uptrend resumes though, price could still have a chance at making higher highs, possibly until the 1.3000 resistance.
Talks of a Fed rate hike in June have been ramped up, thanks to the upbeat US jobs report. Positive revisions to previous releases were seen while the labor force participation rate improved.
To contact the reporter of the story: Samuel Rae at samuel@ forexminute.com