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The Canadian Dollar is down more than 0.5% against the US Dollar from the monthly high with the decline now looking to challenge the origins of last week’s breakout. These 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.

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USD/CAD Daily Price Chart

USD/CAD Price Chart - US Dollar vs Canadian Dollar - Loonie Daily

Technical Outlook: In my latest USD/CAD Weekly Price Outlook we noted that Loonie, “remains within a range just below a critical resistance confluence at 1.3435/37 and the focus is on a reaction off this mark,” with a topside breach favored. Price registered an intra-week high at 1.3521 before pulling back last week with the decline now approaching this key pivot zone yet again.

Interim support rests back at 1.3435/37 with near-term bullish invalidation at the April opening-range high at 1.3402- a break / close below this threshold would shift the focus back toward monthly open support / 100-day moving average at 1.3338/45. Daily resistance stands with the 78.6% retracement at 1.3537.

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USD/CAD 120min Price Chart

USD/CAD Price Chart - US Dollar vs Canadian Dollar - Loonie 120minute

Notes: A closer look at price action shows Loonie trading within the confines of an ascending pitchfork formation with the lower parallel further highlighting confluence support at 1.3435/37. A downside break there is needed to keep the short-bias viable targeting 1.3402- look for a bigger reaction there IF reached. Initial resistance steady at 1.3475 with a breach above the median-line needed to mark resumption targeting 1.3537 and the 1.618% extension at 1.3552.

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Bottom line: USD/CAD is testing the origins of last week’s breakout and we’re looking for support ahead of 1.34 IF the broader up-trend is to remain viable. From a trading standpoint, a good spot to reduce short-exposure heading into the lower parallel – be on the lookout for possible price exhaustion / long-entries on a love lower. Keep in mind we have the BoE and FOMC interest rate decisions on tap next week.

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

USD/CAD Trader Sentiment

USD/CAD Trader Sentiment - US Dollar vs Canadian Dollar Positioning- Loonie Price Chart
  • A summary of IG Client Sentiment shows traders are net-short USD/CAD- the ratio stands at -1.85 (35.1% of traders are long) – bullishreading
  • Traders have remained net-short since April 17th; price has moved 0.8% higher since then
  • Long positions are31.4% higher than yesterday and 30.9% higher from last week
  • Short positions are2.9% higher than yesterday and 36.2% 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 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!

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Relevant US / Canada Economic Data Releases

US / Canada 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!

Active Trade Setups

- Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex