USD/CAD is currently displaying some bullish signs, but lacks the momentum to confirm a full reversal of the bearish trend it has been following. In order to indicate a significant change in the trend, the pair would need to rise more strongly and break above key levels. The risks remain tilted to the downside as long as the bear trend remains intact, and a break below the 1.3440 lows could extend the downtrend towards the next target at 1.3380.
On the daily chart, USD/CAD formed a Two-Bar reversal pattern at the lows on August 27 and 28, which typically indicates a short-term reversal to the upside. This pattern occurs at the end of a downward move when a long red candle is followed by a green candle of similar size and shape. The pair also broke above the trendline for the downward move, with the Relative Strength Index (RSI) rising out of the oversold zone and providing a buy signal, adding further evidence to a potential reversal.
For a bullish reversal to be confirmed, USD/CAD would need to close above the 1.3520-25 level, casting doubt on the bearish trend. A move towards 1.3593 could follow, with a break above this level providing a stronger indication of a trend reversal. However, the current recovery has been slow and weak, leaving the possibility open for the bear trend to resume. A break back below the trendline would signal renewed weakness, with the next bearish target at 1.3380 followed by the bottom of the range at 1.3222.
In conclusion, while USD/CAD is currently showing some bullish signs and potential for a reversal, it is still too early to confirm a definitive change in the trend. Traders should closely monitor key levels and indicators such as the RSI for further confirmation of a bullish momentum shift. The bear trend remains a significant factor to consider, and a break below key support levels could see a continuation of the downward movement in the pair.
