USDCAD Analysis: Escape from the Bearish Trap Coming Soon

While investors betting on the US Dollar were cheering the come-back of the US Dollar, DXY is dropping again, though remains above a significant support level of 92.273.

There are no important announcements expected from Canada, while the US will report on CB Consumer Confidence as per November later today, and must-watch data on GDP, Initial Jobless Claims, New home sales and Crude Oil inventories. The reason why I mentioned Crude oil inventories in this analysis is because the Canadian Dollar is very dependent on the Oil price as Canada is the fourth largest oil exporter.

USDCAD continues the correction after a substantial growth on November 9. The pair is consolidating between $1.30900 and $1.30494.

On a 4-Hour chart USD/CAD has formed a bullish flag pattern, breakout from which will signal a bullish continuation. However, as RSI indicator shows there is also another pattern to watch – bearish rectangle, which if confirmed will signal the decline of USD/CAD down to $1.29812. See the chart below. The bearishness of Dollar/Canadian is also endorsed by Moving averages, both simple moving averages of 100 and 200 and an Exponential MA 50 are above the current quote.The US Dollar is losing against the Canadian dollar since March 2020 and continues the downtrend forming a descending triangle, each forthcoming high is lower than the previous and the forthcoming low is lower than the previous. As seen on a daily chart of the pair, there is a possible another low which should be tested by the pair, before the USD could show strength and breakout from the downtrend.

Since the support of $1.30494 remains intact (there is no closing below it), USD/CAD has all chances to take a chance and jump towards $1.32000 and $1.23400. Fibonacci levels on a 4-Hour chart demonstrate the importance of the aforesaid support level, if the pair closes below $1.30494 there is another support level to watch, which will be in the area of Fibo 0.618 of the November 9 uptrend and a dynamic support of the flag pattern. Only when USD/CAD closes above $1.31000 it will proceed further towards $1.32000.

Bullish continuation of the pair may be backed by the strong US data tomorrow, New Home sales as per October are expected to be at 970K, which is 11K higher than in September, initial Jobless Claims is expected to continue the decline and be 730K, which is 12K lower than the previously announced 740K, and the GDP data might strengthen the US Dollar. Another important update to watch tomorrow is FOMC meeting minutes of course.