Bearish momentum of USDCAD getting stronger

AFTER a parabolic move of more than 1000 pips in March 2020, the USDCAD peaked out at 1.465 and has since descended gradually till date. The downtrend that has lasted for more than a year now can be clearly identified with the lower highs and lower lows across the time period.

Taking a look at nearer term, USDCAD continues to be bearish as it is currently ranging in a descending channel. Within a broader downtrend, a descending channel can be seen as a bearish continuation pattern. At the time of writing, we believe that the pair is set to test its lower support line as signalled by the Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD) Indicator.

Firstly, the formation of a triple top pattern was observed within the descending channel shortly after rebounding off the support, which indicates a strong selling pressure. This pattern can be recognised when the pair is rejected off the similar price level around 1.2630 for three consecutive times, creating three peaks. Failing to breach through the resistance level after three attempts is a bearish sign and the retracement currently being witnessed is likely to send the price down to the support line at 1.222. Moreover, the occurrence of bearish engulfing candles at the first and third peak further validates the downward pressure.