USD/CAD 1H Bearish Outlook: Distribution Phase 1. Market Structure Overview
The market appears to be in a Wyckoff Distribution Phase, as evidenced by the formations of UT (Upthrust) and UTAD (Upthrust After Distribution). This suggests a shift from accumulation to distribution, where large institutional players are offloading positions.
LPSY (Last Point of Supply): The market has already completed a major distribution event, with the LPSY confirming the last attempt to drive prices higher before a downward move.
The BOS (Break of Structure) in the 4H timeframe signifies a bearish transition, further confirming the market's intent to reverse from the current distribution range.
2. Key Levels and Fibonacci Retracements
Resistance Zone: The 0.786 Fibonacci retracement at 1.3587 represents a significant resistance level, aligning with the BC Distribution Zone on both the 1H and Daily timeframes. Any upward retracements would likely find resistance around this level.
Support Levels:
0.618 Fibonacci retracement at 1.3560 serves as a critical short-term support.
0.5 Fibonacci level at 1.3535 aligns with key internal support levels from previous price action and provides a potential downside target.
Point of Control (POC) for 1H distribution sits around 1.35604, highlighting where the most trading volume has occurred. This is a significant level for potential reversals or rejections if prices return to this area.
3. Current Market Sentiment and Projection
Current Price Action is located around 1.3510, which aligns with a weak low forming the A-leg of a corrective pattern. This corrective movement (Wave A) follows a sharp downtrend from the UTAD.
Phase B Leg (Expected): The market is likely entering a retracement or pullback, with Wave B expected to bounce towards the 0.618 Fibonacci level at 1.3560. This would be the ideal level for a bearish continuation.
Wave C Completion: Following the Wave B bounce, the chart suggests another leg down (Wave C), which should aim for lower support zones around 1.3440 to 1.3419, targeting the sell-side liquidity and completing a bearish market cycle.
4. Liquidity Zones
Sell-Side Liquidity: As the market approaches 1.3419, sell-side liquidity from retail positions is expected to be captured. This zone marks the end of the current leg down and could trigger larger order flow or institutional interest.
Buy-Side Liquidity is located above 1.3560, and any significant upward retracement into this area would likely result in a strong reaction from sellers, driving prices lower again.
5. Risk/Reward and Trading Plan
Short Setup:
Entry: Look for short positions between 1.3560 (0.618 Fib level) and 1.3587 (0.786 Fib).
Stop-Loss: Place the stop above 1.3606, just above the LPSY to account for volatility and fake-out moves.
Take-Profit Targets:
Target 1: 1.3535 (0.5 Fibonacci level), representing the first leg of profit-taking.
Target 2: 1.3440 for a deeper retracement and to capture the sell-side liquidity.
Invalidation Point: Any bullish break above 1.3606 would invalidate the bearish setup, as it would signify that the UTAD failed, and the market could enter a continuation of the uptrend.
6. Volume Profile
The Volume Profile shows the highest volume concentration between 1.3545 and 1.3580, indicating that any upward retracement into this zone could face heavy selling pressure. Price is likely to struggle here as this area represents where institutional traders have placed significant orders.
7. Market Bias
The market bias is bearish, given the clear Wyckoff Distribution, BOS, and lower-high structure forming. The primary expectation is a corrective pullback to the 0.618/0.786 retracement zones, followed by a continuation of the downtrend to capture sell-side liquidity at lower levels.
Summary
Bearish Outlook: The market is in a distribution phase and is expected to move lower after a minor retracement.
Key Levels: Watch for resistance at 1.3560-1.3587 and target support levels around 1.3440 to 1.3419.
Risk Management: Use 1.3606 as a stop-loss and aim for a high risk/reward ratio, especially considering the strong volume profile between 1.3545 and 1.3580.
