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USD/CAD Daily Chart

USDCAD Daily Timeframe

Technical Outlook: Last week we questioned whether USDCAD had put in a near-term low at the 1.2415 key support zone- “this level is defined by a long-term 61.8% ext of the broader decline off the 2016 high and converges on a parallel support extending off the 9/21 swing low (red). Note that daily momentum is also attempting to break back above the 30-mark and highlights the risk for a near-term recovery in price.”

Price has since rebounded with daily RSI recovering back above the 30 threshold. The advance is now tested initial resistance at the 1.26-handle and heading into tomorrow’s event risk the focus remains on this level of resistance with a breach higher needed to fuel the next leg in USDCAD. A break below confluence median-line support ~1.2350 would mean BIG trouble for the greenback.

Learn more about Pitchfork & Median-line formations in Michael’s three-part trading series

USD/CAD 120min Chart

USDCAD 120min Timeframe

Notes: A newly identified pitchfork extending off the low highlights near-term support at the median-line with our broader near-term focus higher while above 1.2481. A breach above the upper parallel targets confluence resistance into 1.2680 backed by the double bottom objective / 23.6% retracement at 1.2733/39.

From a trading standpoint, I’ll favor fading weakness while within this near-term formation with a breach above 1.2740 needed to suggest a more meaningful reversal is underway in the Loonie. Added caution is warranted heading into the releases tomorrow as we get both U.S. Non-Farm Payrolls and Canada employment data released at the same time (8:30am ET) and are likely to fuel increased volatility in this pair.

USD/CAD Price Action Primed for NFP, Canada EmploymentUSD/CAD Price Action Primed for NFP, Canada Employment

USDCAD IG Client Sentiment
  • A summary of IG Client Sentimentshows traders are net-long USD/CAD- the ratio stands at +4.35 (81.3% of traders are long) –bearishreading
  • Retail has been net-long since June 7th- price is 6.8% lower since then
  • Long positions are 2.7% higher than yesterday and 14.0% higher from last week
  • Short positions are 19.9% lower than yesterday and 21.6% lower from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USDCAD prices may continue fall. Retail is further net-long than yesterday and last week and the combination of current positioning and recent changes gives us a stronger USDCAD-bearish contrarian trading bias from a sentiment standpoint.
  • That said, sentiment has now reached into fresh yearly extremes AS price is responding to key support. Heading into NFP / Canada employment, the short- bias is at risk while above support. Look for a pullback in long exposure to further suggest a low near-term low may be in place.

What to look for in USD/CAD retail positioning - Click here to learn more about sentiment!

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Relevant Data Releases

USDCAD Docket 8-3-2017

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Other Setups in Play:

- Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex or contact him at mboutros@dailyfx.com.