21 December 2023 131

Yesterday's trading day was marked by the beginning of technical correction of the stock market. Strong downward movements on major indices and index ETFs began in the middle of the American session. The market had been overbought for a long time, and any event, even an insignificant one, could start the unbridled and ungrounded optimism.


Inverse ETFs on "fear indices" were expecting a correction several days before yesterday's events. So these market movements were quite expected.


As for the currency market, it will react with the U.S. dollar strengthening.


An additional technical factor for such strengthening is clearly present in the USDCAD pair. Actually, yesterday this pair made the first impulsive upward rush.


From the point of view of graphical analysis, at the level of 1.3405 the price will start to form a "shelf" with the purpose of further upward breakout to the untested top of 1.348.


The fundamental factors that may create conditions for the formation of this reversal pattern include the expected Friday data on November personal consumption expenditures price indices in the USA. According to forecasts, these indices are expected to decline, which generally underlines the trajectory of the general slowdown in inflation. But the "high season" of Christmas consumer activity could shift actual estimates toward higher price spending. And this will slightly cool down the ardor of that part of the public, who excessively believed in the final and irrevocable trend to reduce inflationary pressures.


The realization of the accumulated potential in such reversal patterns is not quick. The USDCAD price may consolidate in the range of 1.330-1.340 for a long time. This accumulation may take another one or two weeks, so one should be patient. Well, and of course, there is always a risk of canceling this scenario of USDCAD strengthening.


The overall recommendation is to buy USDCAD with the target of 1.348. The loss is to be taken at 1.325.

This content is for informational purposes only and is not intended to be investing advice.

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