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Canadian Dollar Outlook: USD/CAD Reversal Rally from Range Support

Canadian Dollar Outlook: USD/CAD Reversal Rally from Range Support

James Stanley, Senior Strategist

USD/CAD Talking Points:

  • USD/CAD has been range-bound for a month now, with price action building into a box between resistance at 1.3500 and support coming from a few key confluent Fibonacci levels.
  • Are breakouts nearing in USD/CAD? Yesterday saw a fast and buyers have continued to push ever since, exposing the resistance side of the recent range.
  • DailyFX Forecasts are published on a variety of currencies such as the Canadian Dollarand are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.

Do you want to see how retail traders are currently trading USD/CAD? Check out our IG Client Sentiment Indicator.

USD/CAD Reversal Rally Inside of Month-long Range

The Canadian Dollar started the year with a strong rush of strength as USD/CAD fell by more than 500 pips in the month of January. Since then, however, it’s largely been continued weakness in the Canadian Dollar as USD/CAD has pushed back up to the 1.3500 handle. To be sure, there have been instances of congestion along-the-way. From early-March into late-April, the pair put in both lower-highs and higher-lows and then from late-April into current price action, a horizontal range has built-in between two key areas on the chart. At resistance, the 1.3500 psychological level has helped to temper the highs over the past month while support has been furnished from a confluent batch of Fibonacci levels running from 1.3361-1.3385.

USD/CAD Eight-Hour Price Chart

usd/cad usdcad eight hour price chart

Chart prepared by James Stanley

I had looked into the range in USD/CAD in Tuesday’s webinar. Since then, price action has traversed almost the entirety of that formation as yesterday’s test below 1.3361 was aggressively reversed by buyers that have now pushed prices-higher more than 100 pips higher. Price action in the pair is now fast approaching the 1.3500 handle, which has been a key component of resistance for the build of this month-old range.

This could, at the very least, make near-term strategy rather clear: For those that are comfortable looking at USD-weakness scenarios, short-side setups off of range resistance can be attractive, looking for a revisit of range support sub-1.3400. For those looking to retain a bullish USD-bias, awaiting a topside break of that range resistance can re-open the door for bullish breakout scenarios or, alternatively, a revisit to range support. And while directional prognostications and predicting breakouts can be a perilous sport, at the very least, the risk management of the situation is fairly clear.

USD/CAD Two-Hour Price Chart

usd/cad usdcad two hour price chart

Chart prepared by James Stanley

To read more:

Are you looking for longer-term analysis on the U.S. Dollar? Our DailyFX Forecasts have a section for each major currency, and we also offer a plethora of resources USD-pairs such as EUR/USD, GBP/USD, USD/JPY, USD/CAD. Traders can also stay up with near-term positioning via our IG Client Sentiment Indicator.

Forex Trading Resources

DailyFX offers an abundance of tools, indicators and resources to help traders. For those looking for trading ideas, our IG Client Sentiment shows the positioning of retail traders with actual live trades and positions. Our trading guides bring our DailyFX Quarterly Forecasts and our Top Trading Opportunities; and our real-time news feed has intra-day interactions from the DailyFX team. And if you’re looking for real-time analysis, our DailyFX Webinars offer numerous sessions each week in which you can see how and why we’re looking at what we’re looking at.

If you’re looking for educational information, our New to FX guide is there to help new(er) traders while our Traits of Successful Traders research is built to help sharpen the skill set by focusing on risk and trade management.

--- Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

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

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