It’s not every day that different time frames set up reversal structures, but that is just what looks to be happening on the USD/CAD pair. The H1 and daily charts are both showing reversals of the short term bearish trend and the overall longer term bearish move.
The recovery in oil prices and the selloff in the US dollar has led to loonie strength that saw the USD/CAD pair break lower out of the range. That move looks to be running out of steam as a double bottom appears on the daily chart. The price has already strongly rejected off this level and a break higher through the neckline will confirm the double bottom as a reversal pattern.
The Stochastic Oscillator on the daily chart is showing divergence that will add weight to the case for a reversal. The price has painted a slightly lower low, but the Stoch has moved sharply back from oversold and looks to now be forming a much higher low.
On the shorter H1 timeframe, we look to be setting up for a reverse head and shoulders pattern that will confirm an end to the short term bearish trend. The strong rejection off the 1.1938 level suggests there are enough buyers in the market to reverse the current trend. Look for a small pull back to the support at 1.2000 which, if it holds, will be the second shoulder we are looking for.
The 1.2000 is obviously a psychological level and one that has acted as a point of support for price several times recently. If we see it hold, look for resistance to be found at 1.2085, 1.2130 and 1.2193 as the price moves higher in the short term.