Aug 26 (Reuters) - USD/CAD could be set for a much bigger recovery due to a combination of technical and fundamental factors, putting shorts in danger.

USD/CAD recently failed to sustain the break below the 1.3817 Fibo, a 61.8% retrace of the 1.3551 to 1.4248 (May to June) rise, which had hinted at a rejection of the downside. That equatesto a bear trap, which is set when a market breaks below a technical level but subsequently reverses, and is usually a bullish sign. USD/CAD has extended gains for a third consecutive day after Ottawa hit back on Tuesday with retaliatory tariffs on about $20 billion worth of U.S. annual imports and rolled out aid for businesses and workers, after trade talks with Washington collapsed last week. There is scope for a bigger USD/CAD recovery to the 1.3930 Fibo, a 38.2% retrace of the 1.4248 to 1.3734 (June to August) fall. A break and daily close above that level would be a very bullish sign.
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(Martin Miller is a Reuters market analyst. The views expressed are his own)