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Canadian Dollar Outlook: USD/CAD, NZD/CAD, GBP/CAD 2020 Levels

Canadian Dollar Outlook: USD/CAD, NZD/CAD, GBP/CAD 2020 Levels

Peter Hanks, Strategist

Canadian Dollar Outlook:

Canadian Dollar Outlook: USD/CAD, NZD/CAD, GBP/CAD 2020 Levels

The Canadian Dollar was one of the best performing major currencies in 2019, but recent months have seen the currency falter as the competition looks to recapture lost ground. With the onset of 2020 and the subtle shift in strength for the Canadian Dollar, major technical levels may play a crucial role in rebuking larger reversals. Here are the major areas to keep an eye on in the coming weeks.

canadian dollar performances

Source: TradingView

USD/CAD Forecast

In the case of USD/CAD, a recent break beneath support formed by a series of lows from years past could have opened the door lower – potentially paving the way for further CAD strength. With trendline support in the rearview, USD/CAD may look to target horizontal support around 1.2928 before taking aim at subsequent barriers around 1.28 and 1.2682. That being said, the pair possesses formidable support prior to each of these levels that could look to keep the US Dollar afloat in the shorter-term.

USD/CAD Price Chart: Weekly Time Frame (January 2016 – December 2019) (Chart 1)

USDCAD price chart

Topside barriers will look to reside around 1.3370 which coincides with the midpoint of the pair’s January 2016 high and its September 2017 low. Secondary resistance may take shape in the 1.3574 area. Tangentially, the pair’s performance may be owed to broader weakness in the US Dollar more so than an exhibition of Canadian Dollar strength. This relationship can be easily viewed in the recent price action of the US Dollar basket (DXY).

NZD/CAD Forecast

Unlike USD/CAD which has seen the Loonie trudge higher, NZD/CAD has recently undergone a swift reversal from the pair’s October lows as risk appetite soared. Probing the pair’s May 2018 swing low at the time of this article’s publication, NZD/CAD looks poised to test the descending band originating from November 2016 highs. Since its inception, the level has kept the pair in check repeatedly and could provide an attractive opportunity for bullish Canadian Dollar trading strategies.

NZD/CAD Price Chart: Weekly Time Frame (October 2015 - December 2019) (Chart 2)

NZDCAD price chart

Initial areas of note should NZD/CAD turn lower once more exist at the 0.8679 level which is marked by a Fibonacci level that has exhibited its influence in the past. Longer-term support will look to reside around the recent series of lows established in October 2019.

To that end, it could be argued a band of support exists from 0.8240 to the Fibonacci level at 0.8292. In the meantime, it looks as though NZD/CAD may attempt to break the descending trendline and push higher, but any indication bulls are tiring could provide the evidence necessary to begin exploring trades. Follow @PeterHanksFX on Twitter for updates and analysis as price action unfolds.

GBP/CAD Forecast

Another pair with potential opportunity for Canadian Dollar weakness is GBP/CAD. To be sure, Brexit proceedings will play a large role in the Pound’s performance in the first half of 2020, but the pair’s technical standing is what provides an attractive trade setup. Slumping to support around 1.7083 after surging off the August lows, GBP/CAD could use the 200-week moving average in conjunction with horizontal support as a sort of technical springboard to continue its ascent.

GBP/CAD Price Chart: Weekly Time Frame (January 2017 – December 2019) (Chart 3)

GBPCAD price chart

After surging from 1.5868 to 1.78 in quick fashion, a breather is to be expected – almost necessary – before the Pound can look to extend higher once more. While a GBP/CAD trade would likely be more contingent on GBP volatility than CAD strength or weakness, the technical landscape cannot be ignored, and the pair lacks significant topside resistance until 1.74 and 1.78. Consequently, GBP/CAD will remain on my radar as Brexit continues to unfold and the Canadian Dollar seeks to find its broader direction in the new year.

As it stands, it appears the cases of CAD gains are more attributable to counter-currency weakness than Canadian Dollar strength, whereas a strong performance across the board in 2019 overall is indicative of broader Loonie demand.

--Written by Peter Hanks, Junior Analyst for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

Read more:How to Invest During a Recession: Investments & Strategy

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