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USD/CAD Price Outlook: Loonie Threatens Breakout on Easing Trade Tensions

USD/CAD Price Outlook: Loonie Threatens Breakout on Easing Trade Tensions

Michael Boutros,
What's on this page

The Canadian Dollar has continued to trade within the confines of the initial August opening range with news that a working US-Mexico trade deal has been negotiated sending USD/CAD to the monthly lows today in New York trade. Here are the updated targets and invalidation levels that matter on the USD/CAD charts this week. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.

USD/CAD Daily Price Chart

USD/CAD Price Chart - Daily

Technical Outlook: USD/CAD is testing key confluence support today 1.2951/68 – a region defined by the monthly opening range low, the 100% extension of the decline off the yearly high, the 38.2% retracement of the 2018 range and 61.8% parallel of the ascending pitchfork extending off the yearly lows.

A daily close below this level is needed to fuel the next leg lower in price with such a scenario targeting 1.2880 backed by a key confluence at ~1.2840s where the lower parallel converges on the 200-day moving average and channel support. Daily resistance stands at the 1.31-handle with broader bearish invalidation at 1.3165.

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USD/CAD 240min Price Chart

USD/CAD Price Chart - 240min

Notes: A closer look at USD/CAD price action further highlights this support zone- the immediate decline is at risk while above this threshold but the broader focus remains lower while within this descending pitchfork formation. Look for initial resistance at the median-line backed by 1.3067 and 1.31.

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Bottom line: This is a make-or-break levels for USD/CAD near-term. From a trading standpoint, a good spot to reduce short exposure / bring in protective stops. I’ll favor fading strength sub-1.31 with a break lower targeting more significant structural support towards the lower parallel.

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

Most recent Foundations Session- Seeing the Forest from the Trees

USD/CAD Trader Sentiment

USD/CAD Trader Sentiment
  • A summary of IG Client Sentiment shows traders are net-short USD/CAD - the ratio stands at -1.04 (49.0% of traders are long) – extremely weak bullishreading
  • Long positions are2.3% higher than yesterday and 18.0% lower from last week
  • Short positions are 2.5% lower than yesterday and 13.5% lower from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USD/CAD prices may continue to rise. However 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 USD/CAD trading bias from a sentiment standpoint.

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


Relevant USD/CAD Economic Data Releases

USD/CAD Economic Calendar

Economic Calendar - latest economic developments and upcoming event risk. Learn more about how we Trade the News in our Free Guide !

Other Trade Setups in Play

- Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex or contact him at

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