The hourly (H1) USDCAD chart reveals a classic downside pattern, with a high probability of retesting the 1.39950 horizontal level—new resistance—from bottom to top.
Since late July, bearish momentum has prevailed. The pair has gradually updated local lows. On August 7, prices plummeted, highlighting dense selling pressure, a disbalanced market, and a clear breach of a major liquidity pool.
Currently, USDCAD is consolidating near the bottom, between 1.3934 and 1.3960, forming a local accumulation zone.
Several classic technical signals suggest a return to 1.39950 before the next leg down:
Mirror level and polarity reversal. Prior to the sharp move, the 1.3995 level acted as strong support, with multiple bounces off it—particularly during late July and early August. According to the polarity reversal rule, once a strong floor is decisively broken, it automatically transforms into a significant ceiling.
Liquidity sweep and inefficiency closure. The abrupt decline from 1.39875 to 1.3934 created a zone of price imbalance. The market often prevents such sharp moves in order to test the volumes left by large players at the starting point of an impulse.
Bears who triggered the breakout on August 7 need to confirm that no active buyers remain near 1.3995. A retest of this threshold allows the market to scoop up limit sell orders from traders who may be closing their old long positions at breakeven or entering new short bets in line with the broader trend.
The overall recommendation is to buy USDCAD. Profits should be taken at 1.39950. Stop Loss could be set at 1.39100.
Always size the position so that your potential loss (protected by a Stop Loss order) is no more than 1% of your account balance. If you can’t open a position that meets such a risk criterion, it’s safer to skip this trade and wait for a better, lower-risk opportunity.
This content is for informational purposes only and is not intended to be investing advice.
