Bearish Engulfing Pattern Signaling USDCAD Downside Move
11 July 2023
The USDCAD pair is witnessing a decisive moment on its daily chart, shaping up the potential moves for the upcoming weeks or even months. Over the past month, the price broke below the lower line of the symmetric triangle (black), triggering a substantial sell signal. The price dropped significantly, testing a long-term uptrend line denoted by a green color. As anticipated, this line acted as robust support, causing the price to rebound toward the lower line of the symmetric triangle.
During the previous week, the lower line of the triangle was tested as resistance. The price response at this level was quite bearish, resulting in the formation of a bearish engulfing pattern, highlighted by a yellow color. This pattern reflects a considerable rejection of this line as resistance and signals negative sentiment.
As long as the price stays below the lower line of the triangle, the bearish sentiment prevails, and a retest of the green line (long-term uptrend line) becomes more likely. The forthcoming price action around this green line will be crucial.
A weekly close below this green line would deliver a strong sell signal, potentially impacting the market until the end of the year. However, if the price bounces off the green line, it could trigger a buy signal. Yet, a full-fledged buy signal would only be confirmed if the price moves back inside the triangle. The probability of such a scenario, at the moment, appears less likely.