USDCAD is edging lower today but it appears to be in a delicate balance. It is hovering inside the rather busy 1.3482-1.3536 area, as the pair seems to be taking a breather from the downward move that commenced on March 10, 2023. The aggressive convergence of the simple moving averages (SMAs) employed here and the trendless Average Directional Movement Index (ADX) confirm the current range-trading phase.
The stochastic oscillator could offer a potential way out of the current deadlock. It is hovering at its 50-midpoint, but it is also testing the support set by its moving average. A break lower could encourage the bears to push for another lower low in USDCAD. Their first aim would be to break the current 1.3482-1.3536 range populated by the 50-, 100- and 200-day SMAs and the October 4, 2022 low respectively. They would then set their eyes on the 38.2% Fibonacci retracement of the April 5, 2022 – October 13, 2022 uptrend at 1.3375, a tad ahead of the double bottom pattern lows at the 1.3300-1.3314 area.
On the other hand, a bounce higher by the stochastic oscillator could assist the bulls into staging a new rally and limit the recent losses. In addition, there is a bullish double-bottom pattern (bottoms on April 14 and May 8) developing in USDCAD. However, the bulls should avoid jumping the gun as, for the pattern to be valid, the 1.3667 neckline has to be broken first. Should this occur, the potential upside target from this pattern is in the 1.3900 region.
Provided that they clear the much talked about 1.3428-1.3536 area, the bulls would then look for a retest of the 23.6% Fibonacci retracement at 1.3605. Even higher, the double bottom neckline at 1.3667 and the December 16, 2022 high at 1.3704 respectively could prove tougher to crack.
To sum up, USDCAD is at a critical point. The bears appear to have the upper hand due to the downward move since the March 10 high, but the bulls are itching for the completion of the double bottom pattern.