The USDCAD currency pair has been moving in an upward channel with a range of about 600 pips for over a year. In mid-September, the price broke out of the channel at the top and the increases became more dynamic. In the past week, the pair established the maximum of the year at 1.3980.
Bearish engulfing and inside bar on the daily chart
After the maximum was established, the price began to fall and Thursday’s daily candle formed a bearish engulfing formation, accompanied by the appearance of a downward divergence with the MACD. On Friday, a correction of Thursday’s declines appeared and the daily candle formed an inside bar.
Analyzing the current situation on the USDCAD daily chart, we will notice a “two-in-one” formation, that is, a bullish engulfing formation and an inside bar at the same time – I call it a “hybrid” or IObar. It is worth watching the direction of the breakout from this formation, as it may be a clue to further movements of this pair.
USDCAD technical analysis
On the H4 chart, a downward divergence has been going on since the beginning of the Asian session, but the price is still inside the formation. Only overcoming its minimum at 1.3710 could initiate a deeper correction in the uptrend started in mid-September this year.
As a first step, the sellers’ target could be the local S/R level of 1.3570.
The possibility of a continuation of the trend and an upward breakout should also be considered. Then the buyers’ target could be the nearest supply zone of 1.4200.
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