USDCAD: waiting for the breakout

The title says it all - we are really waiting for a breakout. We assume that it will not be a typical breakout, but one that will bring a proper sell signal.

What we are having here is a bearish Head and Shoulders pattern (blue), which has been here since the 9th of November. The formation is not active yet, as the price is still above the neckline. The neckline is in the same timeframe the mid-term upwards trend line (red), which only increases the importance of this element. A breakout of that line alone will not be significant enough though. Right below that, we have a horizontal support (yellow).

In my opinion, for a proper signal, we need to see a breakout of that yellow area first. It may take some time though, and it does not necessarily have to happen as we speak. The reason for that is that the price is now bouncing from the neckline, which is stopping the bears a bit, at least for a while.

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