- USDCAD creates bullish formation after sharp decline
- A close above 1.3400 could boost buying sentiment
- Canadian CPI figures for November due at 13:30 GMT
USDCAD entered a range trade following the slump to a four-and-a-half month low of 1.3349 last Friday. In the four-hour chart, the ongoing sideways move seems to have taken the shape of a bullish double bottom pattern, increasing optimism the pair might soon change direction to the upside.
In other encouraging signals, the RSI has bounced off oversold levels and keeps trending northwards, reflecting a positive bias. Likewise, the MACD continues to gain ground above its red signal line, suggesting that upside forces could persist in the short-term.
Technically though, the positive formation needs a confirmation above the neckline at 1.3400 and above the 20-period simple moving average (SMA). The 61.8% Fibonacci retracement of the July-November uptrend is placed in the same region. Should the pair step above that bar, it could accelerate towards the 1.3480-1.3500 region, unless the constraining line from November 2023 halts the recovery at 1.3435. A continuation above 1.3540 could last till the 38.2% Fibonacci of 1.3590.
In the event the 1.3400 mark stands firm, the pair could retest its recent lows around 1.3349. The 1.3300 round-level, which overlaps with the 2021 ascending trendline, could be another important region to watch before the spotlight falls on the 78.6% Fibonacci number of 1.3265.
Summing up, the technical picture is currently promoting a bullish trend reversal, but traders will need confirmation above 1.3400 to raise their buying orders.
