During January, USDCAD saw a rise of almost 16 big figures, but gains then stalled and attracted profit taking at six year highs.The peak was marked on Monday by a Bearish Engulfing pattern on daily charts – a signal that when coupled with over-bought extremes often leads to a significant correction.

Since that point, the market has found a deeper pullback that has been based so far on the trend defining 13-day moving average. While it is possible that enough demand will build up to use that as a platform for renewed upside, three strong negative performances from the last four days, bearish momentum and strength indicators suggest the correction has further to go.

Alan Collins will focus on the Fibonacci retracement levels at 1.2328 and 1.2182. The risk level is a move beyond 1.2645, Tuesday’s peak, which would signal an earlier than expected resumption of demand.