USD/CAD: Medium-term downtrend to resume on a close beneath 1.3247/42 – Credit Suisse

USD/CAD is breaking its 55-day average at 1.3247/42, channel uptrend and ‘neckline’ to its prior small base to suggest the core bear trend is resuming, which is important as this downturn may be the start of the “right shoulder” to a much larger top, as per Credit Suisse. 

Key quotes

“USD/CAD is back under pressure after the market quickly reverted back lower towards the crucial ‘neckline’ to the small base and 55-day average at 1.3247/42. Although the market has not yet managed to see a closing break below here, the risk of a premature resumption of the core bear trend is now very high.”

“A clear close beneath 1.3247/42 would negate the small base to confirm a direct resumption of the medium-term bear trend and see a fall back to 1.3211/07 – the 50% retracement of the September surge. Beneath here could subsequently see a move back to 1.3171/57. Importantly, weakness from current levels could be the start of the ‘right shoulder’ to much larger long term top, in which case weakness should accelerate.” 

“Resistance moves initially to 1.3266, then 1.3310, above which would ease the immediate downside pressure and see a move back to 1.3332/41, where we would expect to see a cap at first.”