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Canadian Dollar Rate Forecast: USD/CAD Price Rally at Risk

Canadian Dollar Rate Forecast: USD/CAD Price Rally at Risk

Michael Boutros, Strategist

The Canadian Dollar is down more than 0.5% against the US Dollar since the start of the week with a breach of the weekly opening-range highs taking the exchange rate towards near-term down-trend resistance into the close of the week. These are the updated targets and invalidation levels that matter on the USD/CAD charts. Review this week's Strategy Webinar for an in-depth breakdown of this Sterling price setup and more.

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Canadian Dollar Price Chart – USD/CAD Daily

Canadian Dollar Price Chart - USD/CAD Daily - US Dollar vs Canadian Dollar Trade Outlook - Loonie Technical Forecast

Chart Prepared by Michael Boutros, Technical Strategist; USD/CAD on Tradingview

Technical Outlook: In my most recent Canadian Dollar Price Outlook we noted that USD/CAD was “testing a key near-term inflection zone at 1.3145/55- a region defined by the 61.8% retracement of the Julye advance and the July opening-range high.” We highlighted the price rebound off this zone in this week’s USD/CAD Analyst Pick, citing that the, “The immediate risk remains higher for now after rebounding off downtrend support with initial resistance objectives at 1.3228 & 1.3246 – both levels of interest for possible topside exhaustion IF reached.” Loonie is testing these targets today.

Daily resistance stands at the March swing low / 50% retracement at 1.3251/58 – a close above this threshold is needed to suggest a more significant low was registered this week. A break below daily support at 1.3145/55 would mark resumption with such a scenario targeting 1.3094.

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Canadian Dollar Price Chart – USD/CAD 120min

Canadian Dollar Price Chart - USD/CAD 120min - US Dollar vs Canadian Dollar Trade Outlook - Loonie Technical Forecast

Chart Prepared by Michael Boutros, Technical Strategist; USD/CAD on Tradingview

Notes: A closer low at Canadian Dollar price action sees USD/CAD continuing to trade within the confines the descending pitchfork formation we’ve been tracking for over a week now. A breach above the weekly opening-range highs has fueled a near-term breakout in price with the advance now targeting confluence resistance at the 50% retracement / 100% extension at 1.3257/58- look for a reaction there.

Failure here would shift the focus towards near-term support at 1.3214 backed by the weekly open at 1.3175. A breach would likely fuel an accelerated rally exposing subsequent topside resistance objectives at 1.3288 with broader bearish invalidation at 1.3306.

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

Bottom line: The USD/CAD rebound is eyeing initial resistance here and IF this rebound is corrective, price should be caped by the 75% parallel just higher. From at trading standpoint, look to reduce long-exposure / raise protective stops on a stretch into 1.3257/58- be on the lookout for topside exhaustion with a move back below the median-line needed to mark resumption of the near-term decline. Review my latest Canadian Dollar Weekly Price Outlook for a longer-term look at the technical picture for USD/JPY.

Canadian Dollar Trader Sentiment – USD/CAD Price Chart

Canadian Dollar Trader Sentiment - USD/CAD Price Chart - US Dollar vs Canadian Dollar Trade Outlook - Loonie Technical Outlook
  • A summary of IG Client Sentiment shows traders are net-short USD/CAD - the ratio stands at -1.21 (45.3% of traders are long) – weak bullish reading
  • Long positions are 12.0% lower than yesterday and 6.0% lower from last week
  • Short positions are5.8% higher than yesterday and 13.0% 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. 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 Loonie retail positioning are impacting trend- Learn more about sentiment!

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Key US / Canada Data Releases

US / Canada Economic Calendar - USDCAD Key Data Relaeases - Loonie Trade Outlook

Economic Calendar - latest economic developments and upcoming event risk.

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- Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex

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

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