The USDCAD 78.6% retracement down at 1.33165 triggered a strong bullish move.
Apart from a critical Fibonacci correction zone, it marked a confluence level with the trendline support TS2 starting Dec ’18.
Prices, however, have not yet reached the trendline resistance TR1, which suggests two things: one – prices will most likely get there sooner or later either for a breakout or a rejection; two – the pair is bearish in the medium-term as long as prices remain below TR.
In the short-term, the pair is bullish.
The chart above suggests an impeding breakout as prices now consolidate between the TR1 and TS1 levels.
Structurally speaking, we expect the breakout to be on the upside as prices trade in the positive territory of the lower regression zone – the short-term channel started off at the 78.6% Fibonacci. In addition, the RSI (14) indicates a bullish bias.
A bullish attempt could see an extension in prices at TR2. In case this gives in, then the next upside target lays near the 1.3780 level. This is where the TR2 resistance starting Apr ’20 meets the median regression line of the ascending channel.
Bears could push lower towards TS1 at 1.3632 for a retracement before breaking the TR1 trendline though. This could come following a rejection there, or prior to one. In case TS1 weakens further, then the next target we have in our books is the lower channel trendline around 1.3600.
The downward break of the said channel could invalidate the whole upside scenario as bears will eye the 1.3481 and perhaps even the 78.6% Fibonacci once again.