The USD/CAD currency pair is currently testing the resistance of a falling trend line on the 4-hour chart. This trend line has been acting as a significant barrier, and as long as it holds firm, the recent rise from the 1.3631 level could be viewed as a consolidation phase within the broader downtrend that began from the 1.3845 level.
If the trend line resistance continues to hold, another decline towards the 1.3550 area cannot be ruled out after the current consolidation phase. This would be in line with the prevailing bearish sentiment, as the pair remains entrenched in a downtrend.
However, traders should also keep a close eye on the potential for a bullish breakout. If the USD/CAD manages to decisively breach the falling trend line resistance, it could pave the way for a move towards the next resistance level at 1.3695. A sustained break above this level could trigger further upside momentum, with the pair potentially testing the 1.3730 key resistance zone.
If the USD/CAD surpasses the 1.3730 level, it would be a significant development, confirming that the downside move from the 1.3845 high has completed at the 1.3631 low. In such a scenario, the pair could embark on another rally, potentially targeting the 1.3850 area.
In summary, the USD/CAD is currently facing a critical resistance level in the form of a falling trend line on the 4-hour chart. A failure to break through this resistance could lead to another leg lower towards the 1.3550 area, in line with the broader downtrend. However, a bullish breakout above the trend line resistance, followed by a sustained move above the 1.3695 and 1.3730 levels, could signal a potential reversal, with the pair potentially aiming for the 1.3850 zone.