USD/CAD recently broke to the upside from a triangle harmonic chart pattern on its 4-hour time frame. This is a signal that further gains are in the cards for the pair, but it might need to retrace to the Fibonacci levels marked before resuming its climb.
As you can see on the chart, the 38.2% Fibonacci retracement level lines up with a former resistance area. A deeper retracement for the pair could last until the 61.8% Fibonacci retracement level, which lines up with the broken triangle resistance and is close to the 1.1150 minor psychological support.
Stochastic has already reached the oversold area, indicating that selling momentum is already weakening. However, the oscillator hasn’t crossed upwards and reflecting a surge in buying pressure just yet. In addition, a bullish divergence looks ready to form with stochastic making lower lows and price making higher lows.
USD/CAD Technical Outlook
A bounce from any of these potential support zones around the Fib levels and broken resistance areas could take the pair back up to its recent highs near the 1.1250 minor psychological resistance. Take note that the US is set to print its durable goods orders data today and strong results might renew dollar demand. There are no major economic reports set for release from Canada in today’s New York trading session, which suggests that USD/CAD price action could depend mostly on US reports.
A possible selloff could take the pair back down to the triangle support or the rising trend line connecting the pairs lows. With that, the next visible support zone could be at the 1.1050 minor psychological level and a break below this region would indicate that Loonie bears are in control of price action.
Reversal candlesticks or a turn of stochastic could confirm that dollar bulls are ready to push the pair higher. Any potential shifts in risk sentiment, sparked by the conflict in Russia could also impact USD/CAD.
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