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USD/CAD major Head & Shoulders reversal pattern

The USD/CAD pair was seen at the 1.2449 level at the time of writing. The bias is bearish, so the pair could drop deeper anytime. It's located in the sellers' territory and it could approach and reach 1.2422 critical support.

USD dropped in the last hours after the US Consumer Price Index reported a 0.4% growth in September, while the Core CPI rose by 0.2% as expected. The pair maintains a bearish bias as the Dollar Index was rejected by a resistance area.

The DXY was at the support at the moment of writing. The FOMC Meeting Minutes could be decisive later. A hawkish report could save the USD from the downside.

USD/CAD attention at 1.2422 support

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As you can see on the H4 chart, the price action printed a major Head & Shoulders reversal pattern. A break below the uptrend line, through the neckline, signaled a potential deeper drop.

Now it stands below the Descending Pitchfork's lower median line (lml). The level of 1.2422 represents strong static support, a downside obstacle. A valid break through this level, a new lower low could signal a larger downwards movement. Only a major bullish pattern on the 1.2422 will signal that the USD/CAD may rebound.

USD/CAD outlook

USD/CAD could activate the H&S reversal pattern if it drops and stabilizes below the 1.2422 static support. The bias is bearish as long as it stays under the Descending Pitchfork's lower median line (lml).

You should be careful around the 1.2422, a false breakdown with great separation of a major bullish engulfing could bring a new leg higher.

The material has been provided by InstaForex Company - www.instaforex.com