The USDCAD currency pair on the 4-Hour Chart has been following an upward path since 30 April 2020, having found support at the 1.38491 level.
The formation of the Japanese candlestick reversal pattern known as Bullish Hammer signalled the very beginning of the upward bias.
The low prices attracted buyers who entered the market with long positions and as a result they have pulled the Loonie to higher levels, following a pattern of successively higher tops and higher bottoms.
Subsequently, the currency pair formed a Shooting Star Pattern near the resistance level of 1.41722 which hinted at the end of the rally and the potential beginning of a decline.
Upon applying Technical analysis on the price chart, one can see that the Japanese candlestick after the Shooting Star Pattern managed to close below the 10-period Exponential Moving Average line, a fact that also points to the downward direction and the bearish bias in the market.
Additionally, the Relative Strength Index Oscillator registers values below the fifty line, which also confirms the negative sentiment in the market.
Both technical indicators, as well as the Japanese candlestick reversal pattern are in agreement in terms of the pair’s downward bias.
Furthermore, the current price is trading below the upward trend line, which also implies that supply is greater than demand.
Applying the Fibonacci Retracement tool to the low price of the Bearish Japanese candlestick at the price of 1.40777 and dragging it up to the high price of the pattern at the price of 1.41722, three price targets were calculated: –
- First price target is estimated at 1.39832 (200%)
- Second price target is seen at 1.38887 (300%)
- Third price target is projected at 1.37942 (400%)
At time of writing, the first price target has been breached. One would expect that traders will be closely watching the reaction of the market at the historical key support level at 1.38491.
Of course, it remains to be seen whether the crowd psychology as well as the sellers’ pressure will manage to maintain the control of the market and push the USDCAD currency pair lower.
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