(Bloomberg) -- Canada’s dollar may appreciate 2.1 percent against its U.S. counterpart after the currency pair posted an “outside reversal,” according to BMO Capital Markets, a unit of Canada’s fourth-largest bank.The pattern “could signal that the pair is about to resume its test of the downside,” Jonathan Gencher, Toronto-based director of foreign-exchange sales at BMO Capital, wrote today in a note to clients. An outside reversal occurs when a currency’s daily high and low exceed those of the previous day. When it occurs close to a so-called resistance level, the signal is considered bearish, meaning in this case the U.S. dollar may weaken against the Canadian currency. Resistance refers to the upper boundary of a trading range, where sell orders may be clustered.
The loonie, as Canada’s dollar is known, may advance to C$1.1250 if it breaks through its 50-day moving average level of about C$1.1460, Gencher wrote. That would be 2.1 percent stronger than yesterday’s close at C$1.1496. The U.S. dollar rose as high as C$1.1656 yesterday, compared with C$1.1640 the day before. It fell as low as C$1.1439 yesterday, versus C$1.1511 a day earlier.Technical analysis is the study of trading patterns for signals that may foreshadow price changes in a security, commodity, currency or index.
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