The EURCAD completed a multi-month head and shoulders bottom a couple of weeks ago. Indeed the price extended higher following the initial breakout to record a high at 1.3570.
Since then, the price has been correcting lower. Retested the neckline where it found support as expected.
The price formed a long lower shadow Doji candle. Indicating strong rejection. That was followed by holding back above the short-term broken support level at 1.3365(rebounding back above a support level after the initial breakout is a positive sign).
In this trade setup, I am looking for a retest of the most recent swing high at 1.3570 as a first target for the head and shoulders pattern. A more aggressive target can be at 1.3715(The full ideal target for the head and shoulders bottom).
Oil prices have been on the rise recently, and that is positive for the Canadian dollar. That’s why I prefer to see another technical confirmation over a shorter time frame, such as the four-hour chart. Alternatively, seeing oil retreat a bit more, would be enough to confirm the setup.
The key support to watch is the low of the dragonfly candle at 1.3290.