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The USD/CAD pair rallied in the short term as the Dollar Index tried to rebound and recover after its massive drop. As you already know, the DXY dropped after the FOMC but the bias remains bullish, the index could turn to the upside soon.
Technically, the currency pair registered a strong drop but now it has reached a strong downside obstacle. The price action signaled that the sellers are exhausted but a new leg higher is far from being confirmed.
As you already know, the US Advance GDP and the Unemployment Claims came in worse than expected, while the Advance GDP Price Index reported better than expected data. Tomorrow, Canada is to release its Gross Domestic Product which is expected to report a 0.2% drop. On the other hand, the US Core PCE Price Index, Revised UoM Consumer Sentiment, Chicago PMI, Personal Spending, and Personal Income could bring high volatility.
Technically, the USD/CAD pair dropped below the 1.2819 historical level, but it has failed to stay below this downside obstacle. The price action developed a potential Falling Wedge pattern. Still, this reversal formation is far from being confirmed.
In the short term, it could try to test and retest the near-term downside obstacles before trying to jump higher.
Dropping and stabilizing below the 1.2794 former low could activate more declines and could bring new short signals.
A new higher high, a valid breakout above 1.2911 activates more gains. The buyers could have a great chance to go long after making a new higher high.
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