- USD/CAD down more than 5% since December- initial support targets in view
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USD/CAD Daily Price Chart
Technical Outlook: USD/CAD broke below the monthly opening-range lows on January 24th with the decline taking price to fresh four-month lows into the start of February trade. Daily support rests just lower at 1.2244 where the 78.6% retracement of the September advance converges on 2017 slope support.
A break below this confluence region would be needed to keep the short-bias in play with such a scenario targeting subsequent support objectives at the 2017 low-day close at 1.2156 and the 2017 low / Fibonacci confluence at 1.2025/56. Daily resistance is eyed at the 1.2388-1.2416 range with broader bearish invalidation up at 1.2581/97 – a region defined by the monthly open, the yearly opening-range high and the 100-day moving average.)
USD/CAD 240min Price Chart
Notes: A closer look at price action sees Loonie trading within the confines of a well-defined descending channel formation extending off the January highs with the upper parallel further highlighting resistance at 1.2388. The immediate focus is on a break of the 1.2241-1.2388 range to offer near-term guidance.
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Bottom line: Although the broader outlook remains weighted to the downside, the immediate decline is vulnerable while above 1.2241. From a trading standpoint I’ll favor fading strength while within this formation with a break below channel support likely to fuel accelerated losses towards subsequent support objectives at 1.2025/56. Keep in mind we get the release of U.S. NFPs (Non-Farm Payrolls) tomorrow with the event likely to fuel increased volatility in the USD crosses.
For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis mini-series
USD/CAD IG Client Sentiment
- A summary of IG Client Sentimentshows traders are net-long USDCAD- the ratio stands at +1.42 (58.7% of traders are long) – bearishreading
- Retail has remained net-long since Jan 25th; price has moved 0.6% lower since then
- Long positions are 3.4% higher than yesterday and 14.4% higher from last week
- Short positions are 5.9% lower than yesterday and 21.9% 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 to 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.
See how shifts in USD/CAD retail positioning are impacting trend- Click here to learn more about sentiment!
Relevant USD/CAD Data Releases
Other Setups in Play
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- Written by Michael Boutros, Currency Strategist with DailyFX
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