USDCAD seasonal buy

22 December 2023 92
USDCAD seasonal buy

Observation of financial markets in the last six months has formed the confidence that seasonal patterns of financial instruments’ behavior were worked out in this period quite accurately. It concerned both the stock market and the forex market.


We observed the U.S. dollar weakening against a basket of currencies, which is characteristic of November-December from the point of view of seasonality. We also saw an explosive growth of the stock market in North America and Europe, although from the point of view of fundamental factors there was nothing to predict it.


It turned out that the easing of monetary policy in the world miraculously correlated with the seasonal pattern of market growth during this period. Moreover, the seasonal break points of trends were worked out during these six months with accuracy up to a week. It gives grounds to assume that the markets will continue to move in the "seasonal rut" for some time to come.


If we proceed from this hypothesis, then in the near future, approximately starting from the second half of January, we will see a serious correction in almost all segments of financial markets. Speaking about the forex market, the common place of this fracture will be the strengthening of the U.S. dollar. It will be most pronounced in USDCAD, NZDUSD, AUDNZD pairs. It is not difficult to notice that the U.S. dollar is strengthening in relation to commodity currencies.


The probability of the beginning of the correction is also confirmed by technical signals. There are many price levels left on the charts, which have not been tested again, and the accumulative effect of this "attraction" will give its result one day. The USDCAD pair left two levels - 1.347 and 1.337 - at the top without retesting while developing its downward movement.


It is very probable that USDCAD will reach the level of 1.347 if the seasonal upward reversal is realized.


The overall recommendation is to buy USDCAD with the target of 1.347. The loss should be fixed at 1.325.

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

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