The US Dollar Index (DXY) is bouncing aggressively from its yearly open today.
I’ve written about the 103.50 DXY support level several times this week.
And if today’s session closes above 104.12, we have a confirmed bullish reclaim for a move back to 105.60 resistance.
That’s the neckline of a potential inverse head and shoulders that could take the DXY to 110.
This matters for currency pairs like USDCAD, given the close relationship with the dollar index.
As for the USDCAD, the pair is bouncing from the 1.3700 support area this week.
It’s also trading above Tuesday’s high on a 4-hour closing basis.
As long as USDCAD stays above the 1.3750 level on the higher time frames, we likely get the rally back to 1.3880 resistance.
However, given the bullish breakout I wrote about in February and the uptrend since June 2021, USDCAD looks determined to break 1.3880.
A higher time frame close above that area would open the door to 1.4265.
The 1.4265 level was the range highs during the March to May 2020 consolidation.
That said, the 1.4060 area will likely attract sellers too.
But first, USDCAD needs to hold above 1.3750 and take out 1.3880 resistance on the higher time frames.
I have a USDCAD long position from 1.3753, as shared in the Daily Price Action Discord group earlier today.