USDCAD recently broke out of an inverse head and shoulders pattern on its 4-hour time frame and looks ready for an uptrend.

Price could still pull back to a new rising trend line forming before gaining bullish traction.

Applying the Fib tool on the latest swing low and high shows that the 50% level lines up with the trend line and an area of interest around the 1.2600 mark. This is also in line with the 100 SMA, which is above the longer-term 200 SMA to signal that the path of least resistance is to the upside.

Stochastic is still on the move down, though, to show that selling pressure is present. In that case, the correction could go on until the oscillator hits oversold conditions and turns back up.

Canada’s headline CPI turned out better than expected at 0.7% versus the 0.4% estimate, reviving talks of a BOC hike. Other underlying inflation measures also reflected a stronger pace of increase in price levels also.

Meanwhile, the US dollar also stayed supported for the most part of the previous week as risk aversion appeared to linger in the financial markets. There were no major reports out of the US economy on Friday but a few FOMC members gave testimonies.

There are still on major reports from the US economy today, with only a testimony from FOMC member Quarles lined up. Hawkish remarks could keep the dollar support and risk-taking in check, which could shore this pair higher.

By Kate Curtis from Trader’s Way