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USDCAD Bear Flag to Reignite Selling Interest

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On January 20th, USDCAD began a steep descent that would eventually erase more than 2,000 pips before finding support at the 1.2460 handle in early May.

To put things in perspective, it took 74 trading days to wipe out 143 days worth of gains.

I don’t think anybody foresaw such a rapid decline, especially given how buyers appeared untouchable since the rally began in 2011.

But no market can elude the effects of gravity forever.

The consolidation that has taken place since the May 3rd low at 1.2460 has formed a bear flag pattern. Such a formation often signals a continuation of the prevailing trend, which has been down for several months.

In addition to the channel floor, the pair is currently retesting the 1.30 horizontal support level. This area has attracted bids on the last few attempts since July 29th.

Given the three-month bear flag, this confluence of support may offer a compelling area from which to trade a downside break. But as always, a daily close below the 1.30 handle is needed to confirm the pattern and open up downside targets.

The first objective for a move lower comes in near the June 20th gap at 1.2845. A break there would expose the June 23rd low of 1.2678 followed by the prominent 1.2460 May low.

The only thing that could take the weight off of 1.30 would be a move above the July high at 1.3253. This seems unlikely given the fact that so far in August USDCAD has carved out a lower high compared to that of July.

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USDCAD possible bear flag pattern on the daily chart

Leave a Comment:

6 comments
Daniel Akintunde says

just to Thank You for the Insight. More pips to your Account.

Reply
    Justin Bennett says

    You’re welcome, Daniel. Glad you found the commentary helpful. 🙂

    Reply
Rodiyah says

You are simply exceptional when it comes to explaining these analysis. Though am yet to be a registered student under your guidance but am anxiously looking forward to joining you in order to be a better trader. Thank you for the insights they’r always very helpful.

Reply
    Justin Bennett says

    Thank you for the kind words, Rodiyah. It’s great to know you’re finding the material helpful.

    I look forward to having you as a student. Let me know if you have any questions.

    Reply
Sean says

Hi, Justin. Thanks so much for your time and efforts. They are greatly appreciated! I did have a question on the “thirteen-month” Bear flag. Doesn’t it begin around May 3, 2016 (or April 18, 2016, if you count the initial down-leg), so it would only be a 3 1/2 month long (roughly speaking) Bear flag? Either that, or I really don’t have a clue as to what a Bear flag really is. Lol.

Thanks for any help. 🙂

Reply
    Justin Bennett says

    Sean, it should be three months, not thirteen. Thanks for the heads up.

    Reply
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