USDCAD: A Potent Combination of Bullish Signals
03 August 2023
The past few days have unveiled a riveting performance by the American dollar. It's on an upward trajectory against almost every major counterpart in the currency market. Today's spotlight is on its relationship with the Canadian dollar, where a compelling buy signal seems to be emerging.
A glance at the daily chart reveals a series of telling signs. Key among them is the bounce off the long-standing uptrend line, which is highlighted in green. This isn't just a typical bounce; it embodies a 'double bottom' formation, a bullish reversal pattern often followed by a change in the current trend. This double bottom is outlined in yellow, clearly showcasing its formation.
Simultaneously, the price action is wrestling with a horizontal resistance, painted in blue. This resistance doesn't just act as a standard barrier; it's also the neckline of our aforementioned double bottom formation. To add another layer to the complexity, this area intersects with the lower boundary of a symmetric triangle pattern.
For those who've been tracking USDCAD, they'd recall that this symmetric triangle was a dominant theme for the pair in the first half of 2023. It encapsulated a sideways trend, which eventually culminated in a breakout to the downside, signaling a sell. But, in a twist of events, the price seems to be attempting a return into the triangle's confines.
Such a reentry would have profound implications. It would essentially negate the bearish break from the triangle, painting a very bullish picture. When you combine these aspects – the double bottom formation, the bounce from the long-term uptrend, and the potential invalidation of the triangle breakout – they collectively brew a potent buy signal. However, for full conviction, a daily close within the triangle's boundaries is a must.
In summary, the long-term sentiment for USDCAD leans heavily bullish. The only event that might sway this optimism would be a breach of the green uptrend line. But given the current dynamics and momentum, such a scenario seems rather unlikely.