Since finding support at 0.9770 two weeks ago, the USDCAD currency pair has rocketed higher above parity.  Currently trading at 1.0531, the US dollar is now higher by about 7.7% against the Loonie.  But, the current momentum is showing signs of weakening – opening up an opportunity for Canadian dollar bulls in the medium term.

Current price action is beginning to show signs of a rising wedge pattern – a bearish indicator.

With an ascending trendline support located at 0.9805-1.0143 and resistance at 1.0360-1.0546 in the 60-minute time frame, short term horizontal resistance is being established at the 1.0550.  A failure here would reinforce the rising wedge technical formation – and likely push the price action lower to initial support at 1.0500.  Additional indications for the downside potential is being boosted by an overbought stochastic oscillator reading of 89.26.

USDCAD 60-minute timeframe – Source:  FXAlliance Charts

Initial support for the decline will come in at 1.0450, with longer term targets of 1.0271 – the 38.2% fibonacci retracement from the recent rise of 0.9813-1.0548.  But, the longer term target remains contingent on a break below the aforementioned trendline support at 0.9805-1.0143.

Conversely, if the price action remains buoyed by short term buying, traders will look for the 1.0550 to be broken, leading to a resistance test of 1.0655 – the September 1st session high.

A breakdown coincides with potentially bearish news from Fed Chairman Ben Bernanke’s testimony scheduled for tomorrow morning.