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Weekly Technical Perspective on the Canadian Dollar (USD/CAD)

Weekly Technical Perspective on the Canadian Dollar (USD/CAD)

2018-09-26 15:30:00
Michael Boutros, Technical Strategist
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In this series we scale-back and take a look at the broader technical picture to gain a bit more perspective on where we are in trend. The Canadian Dollar rallied to a 15-week high against the US Dollar last week (USD/CAD lower) with a near-term recovery in price likely to offer opportunities in the days ahead. Here are the key targets & invalidation levels that matter on the USD/CAD weekly chart.Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.

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USD/CAD Weekly Price Chart

USD/CAD Price Chart - Weekly

Notes: USD/CAD is trading just above confluence support at 1.2880- a region defined by the 38.2% retracement of the 2017 advance, the August low and the 2012 trendline. This key barrier is backed closely by the 1.2830 where 52-week moving average converges on former pitchfork resistance.

Its decision time for the Loonie - a break below these levels would be needed to suggest a more significant high is in place with such a scenario eyeing subsequent confluence support objectives at 1.2567/79 - (61.8% retracement, 2018 open and 2017 trendline support). Interim resistance stands with the yearly high-week close at 1.3130 with bearish invalidation up at the June trendline, currently ~1.3190s.

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

Bottom line: The risk remains weighted to the downside in USD/CAD while below 1.3130 with a break below confluence support at 1.2830 needed to fuel the next leg lower in price. That said, price is coming off support here and a near-term recovery may offer more favorable short-entries in the days ahead. From a trading standpoint, I’ll favor fading strength but tread lightly- it’s the end of the month & quarter with heavy event-risk on tap.

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USD/CAD Trader Sentiment

USD/CAD Trader Sentiment
  • A summary of IG Client Sentiment shows traders are net-long USD/CAD - the ratio stands at +1.73 (63.3% of traders are long) –bearishreading
  • Traders have remained net-long since September 14th; price has moved 0.6% lower since then
  • Long positions are 8.5% lower than yesterday and 58.2% higher from last week
  • Short positions are 8.4% higher than yesterday and 10.8% higher from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USD/CAD prices may continue to fall. Yet, traders are less net-long than yesterday but more net-long 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!

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Previous Weekly Technical Perspectives

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

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

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