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Canadian Dollar Technical Analysis: USD/CAD Head & Shoulders Chart Pattern in Focus

Canadian Dollar Technical Analysis: USD/CAD Head & Shoulders Chart Pattern in Focus

Daniel Dubrovsky, Senior Strategist

Canadian Dollar, USD/CAD, Head & Shoulders, IG Client Sentiment – Technical Forecast

  • Canadian Dollar may rise versus the US Dollar based on the technicals
  • USD/CAD faces a Head & Shoulders chart formation, will it confirm?
  • Retail traders flipped net-long USD/CAD first time since September

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Canadian Dollar Faces Bearish Head & Shoulders Chart Formation

From a technical standpoint, the Canadian Dollar could be readying to make a move against the US Dollar. USD/CAD found a peak in October at 1.3978 before entering a consolidative state. Since then, the pair appears to have been carving out a bearish Head & Shoulders chart formation.

The head is at 1.3978, followed by the right shoulder at around 1.3808. The neckline appears to be around 1.3503, which is where the pair was sitting around the time of publication. The 50-day Simple Moving Average (SMA) is also being tested – see the daily chart below.

Confirming a breakout under the latter, as well as the neckline of the Head & Shoulders, could open the door to reversing the August – September uptrend. Such an outcome places the focus on immediate support below, which seems to be the midpoint of the Fibonacci retracement at 1.3353.

Extending losses beyond that exposes the 61.8% level at 1.3205 before the 78.6% point at 1.2995 comes into focus. Otherwise, a turn higher at the neckline may invalidate the chart formation. Breaking above 1.3808 opens the door to revisiting the current 2022 high at 1.3978.

USD/CAD Daily Chart

USD/CAD Daily Chart

Chart Created in TradingView

Canadian Dollar Sentiment Analysis - Neutral

According to IG Client Sentiment (IGCS), about 52 percent of retail traders are net-long USD/CAD. In fact, this is the first time most investors are long the pair since early September. IGCS tends to function as a contrarian indicator, meaning that further losses may be in store for USD/CAD if positioning continues to head in this direction. But, downside exposure has increased by 32.49% compared to yesterday. As such, the combination of current sentiment and recent changes is offering a mixed outlook for the time being.

USD/CAD Mixed
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 15% -17% -7%
Weekly -24% 23% -1%
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Canadian Dollar Sentiment Analysis - Neutral

*IGCS chart pulled from November 7th report

--- Written by Daniel Dubrovsky, Senior Strategist for DailyFX.com

To contact Daniel, follow him on Twitter:@ddubrovskyFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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