USDCAD – Rising Wedge Breakdown Signaling Bearish Reversal

USDCAD – Rising Wedge Breakdown Signaling Bearish Reversal
Pair: USD/CAD
Timeframe: 30-Minute
Date: May 6, 2025
Type: Pattern-Based Reversal Setup
Bias: Bearish

🧠 Technical Pattern: Rising Wedge (Bearish Reversal)
The chart presents a clearly defined Rising Wedge pattern, a bearish formation that often appears after an uptrend or during consolidation. It's marked by:

Two upward-sloping trendlines that converge over time.

Support Line (lower trendline): Connecting higher lows.

Resistance Line (upper trendline): Connecting higher highs.

This wedge shows weakening bullish momentum, with each new high being met with less enthusiasm, indicating exhaustion and a likely trend reversal.

🔎 Structure & Key Zones
Resistance Zone: Around 1.3820 – 1.3840, tested multiple times but failed to break convincingly.

Support Zone (Pre-Breakdown): Around 1.3760 – 1.3770, where price was repeatedly supported before the breakdown.

Wedge Breakout: The price decisively broke below the wedge support, signaling bearish control.

This breakdown aligns with classic technical theory, where a bearish wedge breakdown often leads to a sharp downward move.

📌 Trade Setup Details
✅ Entry Plan
Breakout Entry: Upon confirmation of the break below the wedge structure.

Retest Opportunity: Price may retrace back to the former support (now resistance) zone around 1.3785 – 1.3790, offering a secondary entry.

🎯 Targets
TP1: 1.37651 – A key intraday level near a minor structure low.

TP2: 1.37434 – The projected target based on the wedge height and a strong horizontal support area.

🛑 Stop Loss
Placed above the wedge’s upper boundary and prior swing high at 1.38403, which invalidates the bearish breakout if breached.

📐 Target Projection Logic (Measured Move)
The wedge's maximum height is projected downward from the breakout point to estimate a reliable target zone.

In this case, the projected move reaches 1.37434, aligning with prior price action support and enhancing the probability of the setup.

⚠️ Risk Management Considerations
This setup offers a favorable risk-to-reward ratio, especially on a retest entry.

Traders should confirm the move using volume analysis or a candlestick rejection at the retest level.

Proper position sizing and discipline on SL placement are key to managing potential whipsaws.

🧾 Summary of Trade Idea
Component Details
Pattern Rising Wedge (Bearish)
Bias Bearish
Entry Zone 1.3785–1.3790 (on retest)
Stop Loss 1.38403
TP1 1.37651
TP2 1.37434

This is a textbook example of a wedge breakdown trade, combining clean structure with actionable levels. Ideal for short-term traders or intraday swing traders seeking precision-based setups.