USD/CAD recently broke above a triangle pattern on its 4-hour time frame, suggesting that the uptrend is ready to resume. This breakout was sparked by comments from BOC Governor Poloz, suggesting that a rate cut might be in the cards.
After its rally past the 1.1200 mark though, USD/CAD retreated back to a resistance turned support zone. This is in line with the 50% Fibonacci retracement level, which is also close to the 1.1150 minor psychological support. The broken triangle resistance coincides with the 61.8% Fib level, which might also serve as support.
In addition, there’s a possible bullish divergence, with stochastic making lower lows and price making higher lows. Once the oscillator starts crossing higher and moving out of the oversold region, the pair might also be in for a climb.
Going long at 1.1150 with a stop below the 61.8% Fib and back inside the triangle could yield a 2:1 return on risk if one aims for the 1.1250 level.
By Kate Curtis from Trader’s Way