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USD/CAD Make or Break Levels- Constructive Above 1.2778

USD/CAD Make or Break Levels- Constructive Above 1.2778

Michael Boutros, Strategist
  • USDCAD attempting to breach 2016 trendline resistance
  • Updated targets & invalidation levels
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Chart Created Using FXCM Marketscope 2.0

Technical Outlook: Earlier in the month we highlighted a key outside-day reversal off critical support in USDCAD with our focus weighted to the topside. The advance now looks to be challenging a slope line extending off the 2016 high with the rally holding just below confluence Fibonacci resistance at 1.2976/85- note that this level also converges on a long-term median-line extending off the 2006 low (purple-dotted).

The pullback is approaching near-term support & the weekly opening range should offer some guidance here. We’ll be looking for a pullback to offer entries with a general topside bias while above last week’s lows. A breach higher from here puts the focus on last month’s high at 1.3215, the 200-day moving average (~1.3360) and the key 1.3419/61 pivot range. Keep in mind the Dow Jones FXCM U.S. Dollar Index (Ticker: USDOLLAR) is also approaching structural resistance a bit higher and broader dollar weakness could fuel a more precipitous pullback before moving higher. Watch for cues in the greenback heading into US economic releases this week.

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USDCAD 30min

Notes: We’ve been tracking this setup on SB Trade Desk for the past few weeks with Friday’s breach above basic slope resistance dating back to the yearly highs now being tested as support at 1.2861/77- a region defined by the October low-day close & the 50% retracement of the decline off the 3/24 high. It’s too early to tell if this descending median-line formation is in play, but bottom line: we’ll be looking for a low / long triggers while above 1.2778 (near-term bullish invalidation). A breach above the upper median-line parallel targets Fibonacci resistance at 1.2976/85 and a close above is this level is needed to validate the next leg higher. Subsequent topside objectives are eyed at 1.3098 & 1.3166.

A break below 1.2737 shifts the focus lower targeting the 4/27 swing high / 61.8% retracement at 1.2671/93. A quarter of the daily average true range yields profit targets of 28-32 pips per scalp. Added caution is warranted heading into this week’s event risk with U.S. CPI, FOMC minutes and Canadian retail sales & CPI on tap. Continue tracking this setup and more throughout the week- Subscribe to SB Trade Desk and take advantage of the DailyFX New Subscriber Discount!

Check out SSI to see how retail crowds are positioned as well as open interest heading into the tomorrow’s key event risk.

Looking for trade ideas? Review DailyFX’s 2016 2Q Projections !

Relevant Data Releases

Other Setups in Play:

---Written by Michael Boutros, Currency Strategist with DailyFX

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