USDCAD ready for a breakout

Last time we analysed the USDCAD, we anticipated that this pair will go south. It was at the beginning of the December and the pair was around 1.3280. After that, we had almost 7 bearish days and the price indeed declined 150 pips. They reached the lower line of the flag and then decided to correct recent drop and went higher. Upswing stopped exactly on the previous highs and in the same time: 50% Fibonacci. That was the last stronghold for the sellers ad they used that wisely.

Price went down again and is now testing the lower line of the flag for the 4^th time in the last few months. So far we do not see a bounce and the price is consolidating above the support. This is usually a negative sign and increases the odds for a breakout especially when we we will check all the previous bounces, which started almost immediately when price touched the lower line of this formation.

Looking on this pair in the short term can be useful, on the hourly chart we can see that traders attempted to create an inverted head and shoulder formation but they couldn't finish that with an upswing yesterday straight away after they created a right shoulder. Price went lower and now it looks more like a rectangle (blue area), which is a trend continuation pattern and we all know what is the trend right now.

Putting all that together give us a negative outlook on this instrument but sell signal is not yet created here. What we are missing is the breakout of the lower line of the flag. Once the price will be able to break this support, sell signal will be active.