Bearish Revenge on the USDCAD

May was very optimistic on the Loonie because the price broke an important horizontal resistance (50% Fibonacci) and set the new yearly highs. After that, traders tested that recent resistance as a support (which is absolutely normal thing to do) but surprisingly they failed to defend it and hold the price above. That changes the mid-term situation a lot.

What we do have here now is a false bullish breakout (orange), which is usually a strong signal in the opposite direction (down). As we speak, the price is making new monthly lows and it looks like this movement will be continued. Why? Because that what is usually happening after the false breakouts and in addition to that we do not have any supports ahead of us. The only two that could help are the up trend lines (red and black) but we still have some space to reach them.

In overall, we do have a nice selling opportunity on this instrument, which is available for the mid and long-term traders. Our bearish scenario will be denied once the price will come back above the 50% Fibonacci but chances for that, with the current setup, are limited.

This article is written by Tomasz Wisniewski, a senior analyst at Alpari Research & Analysis