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In this series we scale-back and look at the broader technical picture to gain a bit more perspective on where we are in trend. The Canadian Dollar has fallen more than 8.4% against the US Dollar year-to-date with USD/CAD attempting to rally for the sixth consecutive week. In fact, price has seen just one down-week since the October 1st low and the immediate focus is on a critical resistance pivot just higher. Here are the key targets & invalidation levels that matter on the USD/CAD weekly chart heading into the close of the year.

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USD/CAD Weekly Price Chart

USD/CAD Weekly Price Chart

Notes: In our last USD/CAD Weekly Technical Outlook we highlighted that price was approaching, “a key resistance zone at 1.3375-1.3435- a region defined by the 50% retracement of the 2016 decline, the June swing highs and the 2017 yearly open. A breach / weekly close above this threshold is needed to keep the immediate long-bias viable.”

A breakout on December 18th fueled the advance with price accelerating towards the next major confluence resistance zone at the 61.8% retracement of the 2016 decline / 2017 high-week close at 1.3647/86. Note that weekly RSI has just broken into overbought territory and keeps the bulls in control for now- a topside breach from here targets subsequent resistance objectives at the 2017 highs at 1.3793 and 2012 slope parallel, currently at ~1.39. Interim support rests at 1.3375 with broader bullish invalidation down at highlighted confluence zone at ~1.3030.

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Bottom line: USD/CAD is testing BIG resistance upper here and a breach / close is needed to keep the broader long-bias in play. From a trading standpoint, the immediate advance may be vulnerable below this threshold- a good place to reduce long exposure / raise protective stops. For now, keep an eye out for possible topside exhaustion while below this critical zone.

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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 +-5.97 (14.3% of traders are long) – bullish reading
  • Traders have remained net-short since October 9th; price has moved 4.7% higher since then
  • Long positions are 2.0% higher than yesterday and 18.4% lower from last week
  • Short positions are 2.0% higher than yesterday and 3.0% higher 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. Traders are further net-short than yesterday and last week, and the combination of current sentiment and recent changes gives us a stronger USD/CAD-bullish contrarian trading bias from a sentiment standpoint.

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

Previous Weekly Technical Charts

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

Follow Michael on Twitter @MBForex