USD/CAD Signals a Bearish Outlook with Trendline Breakout

USD/CAD Signals a Bearish Outlook with Trendline Breakout

USD/USD About Faced

USD/CAD is turning a bullish breakout signal into a bearish one this week. At the beginning of the week, USD/CAD broke above a resistance at 1.0985 and looked poise to rally toward the next resistance around 1.0150 from April. However, we saw sharp retreat after this brief breakout. As we wind down the 8/27 session, USD/CAD has broken below the August low at 1.0860.

USD/CAD 4H Chart 8/27
usdcad 8/27 4h chart

(click to enlarge)

The 4H chart shows USD/CAD putting in a large price top. Price also broke below the 200-period SMA. The 4H RSI fell below 30, which shows bearish momentum in this time-frame.

If there is a pullback, a bearish market should have sellers in the 1.09-1.0925 area, which represents the middle of the broken range.

In the daily chart, you can see that USD/CAD broke below a rising trendline from July. The strong bearish daily candle itself suggests there will be further bearish outlook. If price indeed holds south of the 1.09-1.0925 area. price should be pressured toward 1.08-1.0815, which contains a previous support pivot, and the 50-day SMA.

USD/CAD Daily Chart 8/27
usdcad 8/27

(click to enlarge)

We should also look for the daily RSI to fall below 40 to show loss of bullish momentum. In the bearish scenario, we have the July low at 1.0620 in sight. If price does indeed push to 1.0620, it would also break below a key rising trendline seen in the weekly chart.

We can see that when price held above 1.06, it held above this rising trendline. Now even a break below 1.07 might break the trendline. Furthermore, note that the RSI is still holding above 40 in the weekly chart. If price breaks below the trendline, then the 1.0620 low, it should also drag the RSI below 40, at which point, the USD/CAD could enter into a major bearish outlook.

If this week’s weekly candle were to close now, it would show an engulfing pattern, which adds to the case for the bearish scenario.

USD/CAD Weekly Chart 8/27
usdcad weekly chart 8/27

(click to enlarge)

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