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V-Shape Reversal Might Signal Bullish Continuation in USD/CAD

The USD/CAD has been in messy action throughout August and into September. Last week, after Fed held the federal funds rate at 0-0.25% the USD initially slid across the board was recovered quickly. When we look at the USD/CAD, we can see that it broke a triangle pattern but quickly rebounded before reaching 1.30.

USD/CAD 4H Chart 9/21


(click to enlarge)

We can see the v-shape reversal immediately following the bearish breakout. As price pushes above 1.32 and back above the cluster of 200-, 100-, and 50-period simple moving averages in the 4H chart, price action looks more like a false break to the downside. This could translate into a bullish signal, following the logic that the dip was a "clear-out". 

USD/CAD Daily Chart 9/21


(click to enlarge)

When we look at the daily chart, the bullish scenario makes sense. The prevailing trend has been bullish at least since June. After the recent messy consolidation, price is still above the 200-, 100-, and 50-day SMAs and the RSI is above 40, even above 50. These are signs of a bullish market. 

Get ready for a push to the 1.3380-1.34 area which involves the high on the year. There is also more upside risk above these highs because after all the FOMC is hawkish relative to the BoC.