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Canadian Dollar Price Outlook: USD/CAD Range Trade – Breakout Levels

Canadian Dollar Price Outlook: USD/CAD Range Trade – Breakout Levels

Michael Boutros, Strategist

The Canadian Dollar surged 0.86% against the US Dollar last week but halted near multi-week lows with USD/CAD continuing to trade within the confines of a well-defined price range heading into a sixth consecutive week. These are the updated targets and invalidation levels that matter on the USD/CAD weekly chart. Review my latestWeekly Strategy Webinar for an in-depth breakdown of this Loonie price setup and more.

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Canadian Dollar Price Chart – USD/CAD Weekly

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

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

Notes: In my latest Canadian Dollar Price Outlook we noted that, “Ultimately, the goal is to sell a higher-high here for a larger correction.” We didn’t get a higher high, but price did test the high the following day before posting an outside-day reversal lower. The move marks the largest weekly decline / range since the weekly of September 19th – that weekly range has continued to govern price for the past five weeks with momentum leveling-off around 50.

USD/CAD is stuck in a range just below key confluence resistance at 1.3355/70- a region defined by the 61.8% retracement of the May decline and the yearly high-week close. A consolidation pattern may be in play here off the September highs but ultimately, we’ll be looking or a break of the 1.3155-1.3370 range for further guidance on our medium-term directional bias. A downside break exposes the yearly low-week close at 1.3059 while a topside breach would shift the focus toward the upper parallel near 1.3467.

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

Bottom line: USD/CAD is in a range just below critical resistance- the immediate focus is on a break of 1.3155-1.3370 for guidance. From a trading standpoint, the recent decline keeps the risk weighted to the downside targeting the lower bounds of the range – look for exhaustion on this rebound ahead of 1.3280 IF price is heading lower. I’ll publish an updated Canadian Dollar Price Outlook once we get further clarity on the near-term USD/CAD technical trade levels.

Canadian Dollar Trader Sentiment – USD/CAD Price Chart

Canadian Dollar Trader Sentiment - USD/CAD Price Chart - Loonie Positioning - Technical Forecast
  • A summary of IG Client Sentiment shows traders are net-short USD/CAD - the ratio stands at -1.18 (45.85% of traders are long) – neutral reading
  • Long positions are8.96% higher than yesterday and 58.33% higher from last week
  • Short positions are 15.06% higher than yesterday and 37.13% 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 more net-short than yesterday but less net-short from last week andthe 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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Latest Weekly Technical Charts

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--- Written by Michael Boutros, Technical 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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