USDCAD | A BEARISH REVERSAL?USDCAD | BEARISH REVERSAL
USDCAD has formed a short term top at 1.33084 where daily closing gives a rejection candle indicating a bearish reversal sign.
On the shorter timeframe, the USDCAD has shown multiple bearish sign which gives weight for further downside atleast for short term (if not reversal)
1. Formation on Head and Shoulder Pattern
Head n Shoulder is a reversal pattern and is more effective when formed near top resistance after a bullish rally. In our case, we have seen good bullish rally in USDCAD then testing the top and failed to break above it. Since the formation is on lower timeframe the pair can move short term in downward direction.
2. Break of Key Support Trendline.
USDCAD has been respecting the key level of rising support trendline where every time price moves in the direction of trendline, bulls give respect to it and raise the price from there. But recently we have seen a clean break below from trendline indicating the bulls are exhausted and might remain absent from the scene atleast for the shorter term.
3. Appearance of Bearish Divergence on Key Resistance
Divergence has always been a key indicator in catching the bullish/bearish reversal specially after forming on top. This time the divergence has appear on RSI where price is making higher high and indicator is making lower high; a sign of bulls tiredness. We may see a fall once the highlighted support is broken
TRADE PLAN:
One can adopt sell on strength strategy with just 50 pips stoploss from the current level.
First Target is 70 pips below the current level while one can play for further downside if bulls remain absent from the scene.
Let us know what do you think of the idea in comment sections.
