USDCAD Price Analysis: Breakdown of H&S indicates more weakness ahead, 1.3200 eyed

• Loonie bulls have been strengthened amid a risk-on market mood.
• The breakdown of an H&S chart pattern has triggered a bearish reversal.
• Potential death cross formation will trigger more downside ahead.

The USDCAD pair dropped in early Asia after facing barricades around the critical hurdle of 1.3468. A sheer recovery in S&P500 clarified that the risk-on impulse is solid and every pullback in risk-perceived assets has been considered as a buying opportunity for the market participants.

Meanwhile, the US dollar index (DXY) has turned sideways after a mild recovery from a fresh seven-week low at around 109.35.

On a four-hour scale, the asset has delivered a downside break of the Head and Shoulder chart pattern that indicates a bearish reversal after a prolonged consolidation phase. The south-side break of the neckline placed from October 5 low at 1.3505 has accelerated odds of a vertical fall ahead.

The 50-and 200-period Exponential Moving Averages (EMAs) are on the verge of delivering a ‘death cross’ at around 1.3585, which will add to the downside filters.

Meanwhile, the Relative Strength Index (RSI) (14) has shifted into the bearish range of 20.00-40.00, which indicates that the downside momentum has been triggered.

Going forward, a decisive move below Tuesday’s low at 1.3387 will drag the asset towards the round-levels support at 1.3300, followed by September 1 high around 1.3200.

Alternatively, the Loonie bulls could lose their grip if the asset manages to surpass the previous week’s high at 1.3809. This will drive the asset toward October 14 high around 1.3900 and October high of around 1.3978.

USDCAD four-hour chart