In today's analysis, we focus on the American dollar to Canadian dollar (USD/CAD), which has been experiencing heightened volatility. This is largely driven by trade war concerns and potential tariffs on Canada, which have had a significant impact on the Canadian dollar's price movements.
From a technical perspective, USD/CAD has been moving sideways inside an orange rectangle since mid-December. Attempts to break either the upper resistance or lower support within this range have failed repeatedly. Recently, the pair broke to the upside, signaling a potential bullish breakout, but the reversal that followed was sharp and fast, cancelling the entire upswing. The price has now fallen back into the sideways trend and is testing the lower boundaries of support.
This failed breakout, highlighted by a blue rectangle, can now be classified as a false breakout, potentially a market manipulation to trigger stops and trap buyers. Currently, the price is fighting near key support levels.
Two critical support levels are in play:
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The lower orange line, which defines the lower boundary of the sideways range.
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The yellow support, which has so far only been tested with candle wicks. This level is the last defense for buyers, as long as the price does not close a full candle body below it.
If the daily close falls below the yellow support, it would confirm a strong sell signal and indicate a potential breakout to the downside, escaping the sideways trend. Until then, buyers still have a chance to defend the support area and keep the pair within the range.
The coming sessions will be crucial in determining which direction USD/CAD will take—whether it remains in the sideways trend or breaks down into a new bearish phase.