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USDCAD Continuation of the Long-term Downtrend

12/28/2022 1:05 PM

Despite the recent rebound of the Canadian currency by 1.87% since October 17, rising inflation, the “hawkish” activity of the US Federal Reserve, poor global economic growth, and ongoing market uncertainty have contributed to the strengthening of the position of the US currency, which traditionally acts as a shelter asset for investor capital. Also, receding fears of a US recession and the readiness of the Chinese authorities to open national and international borders seem to give hope to dollar “bulls.” However, WTI Crude Oil has gained 11.1% over the past two weeks, pushing USD/CAD to 1.3520 as Canada is a major energy supplier.

The second reason for the decrease in the asset is the fixation of large long positions by market participants around 1.3670. Thus, the chart shows the likely completion of the upward corrective pattern and the continuation of the long-term downtrend. The nearest support level, which determines whether the trading instrument will continue to decline, is 1.3470, after which the rate will reach November’s low of 1.3250, and if it is held, the December high of 1.3670 may be renewed.

The medium-term trend is upwards, but now a correction is developing towards it to test the key support around 1.3450–1.3427, after its breakdown, the trend will change downwards, and the “bears” may test the lower zone 2 (1.3205–1.3182).

Resistance levels: 1.3670, 1.3800, 1.3960. | Support levels: 1.3475, 1.3250.

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