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USD/CAD Price Analysis: Canadian Dollar on the Offensive

USD/CAD Price Analysis: Canadian Dollar on the Offensive

2018-06-28 17:01:00
Michael Boutros, Technical Strategist
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The Canadian Dollar looks poised for further gains with USD/CAD looking vulnerable here after rallying nearly 11% off the September low. Ultimately, the pullback should offer more favorable long-entries as price continues to trade within the confines of a broad ascending technical formation. These are the updated intraday targets & invalidations levels that matter for USD/CAD heading into the close of the June trade.Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.

USD/CAD Daily Price Chart

USD/CAD Daily Price Chart

Technical Outlook: In last week’s Technical Perspective on the USD/CAD, we highlighted a breach above confluence resistance at 1.3100 (also the objective monthly opening-range) with our broader focus weighted to the topside in price. The rally extended into the 50% retracement of the 2016 decline at 1.3376 with price failing a second attempt yesterday on building momentum divergence. Note that the 61.8% line of the ascending pitchfork formation extending off the yearly lows also converges on this region into the close of the week/month.

The immediate threat is lower against the high-day close at 1.3341 with a break below former slope resistance (blue) at ~1.3240 shifting the focus back towards the median-line at 1.3165 and a more significant Fibonacci support confluence at 1.3100/32- both areas of interest for possible exhaustion / long-entries IF reached.

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USD/CAD 240min Price Chart

USD/CAD 240min Price Chart

Notes: A closer look at Canadian Dollar price action shows the rejection of the 1.3376 resistance barrier with USD/CAD now attempting to break below the weekly opening-range lows. It’s too early to rely on this near-term slope, but the upper parallel further highlights resistance at the high-day close.

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Bottom line: I’m willing to look lower while below the high-day close at 1.3341 targeting the median-line ~1.3165. Keep in mind tomorrow is the close of the week, month and quarter – not traditionally a good time for near-term positioning. That said, look for a defense of this high heading into the start of the month with a break below 1.31- needed suggest a larger reversal is underway. A topside breach/close above 1.3376 puts the broader long-bias back in-play with such a scenario targeting subsequent resistance objectives at 1.3435 and 1.3535. Join me on Friday for the return of my Foundations of Technical Analysis webinar series to review this setup and more!

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

USD/CAD IG Client Positioning

USD/CAD Trader Sentiment
  • A summary of IG Client Sentiment shows traders are net-short the USD/CAD- the ratio stands at -2.84 (26.0% of traders are long) – bullishreading
  • Traders have remained net-short since May 22nd; price has moved 3.5% higher since then
  • Long positions are 13.3% higher than yesterday and 4.4% lower from last week
  • Short positions are12.8% lower than yesterday and 5.3% higher from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USDCAD prices may continue to rise. Retail traders are less net-short than yesterday but more net-short from last week and the combination of current positioning and recent changes gives us a further mixed USDCAD trading bias from a sentiment standpoint.

See how shifts in USD/CAD retail positioning are impacting trend- Learn more about sentiment!

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Relevant USD/CAD Data Releases

USD/CAD Economic Calendar

Economic Calendar - latest economic developments and upcoming event risk

Other Setups in Play

- Written by Michael Boutros, Currency Strategist with DailyFX

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

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