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Canadian Dollar Outlook: USD/CAD Plummets into Support- Loonie Stall?

Canadian Dollar Outlook: USD/CAD Plummets into Support- Loonie Stall?

2019-10-29 15:30:00
Michael Boutros, Strategist
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The Canadian Dollar offensive against US Dollar stalled this week with the a three-week breakdown in USD/CAD taking price into the first major support hurdle. These are the updated targets and invalidation levels that matter on the USD/CAD weekly chart. Review this week's Strategy Webinar for an in-depth breakdown of this oil price setup and more.

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Canadian Dollar Chart – USD/CAD Weekly

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

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

Notes: In my last Canadian Dollar Weekly Price Outlook we noted that, “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.” Two-weeks later, and USD/CAD has plummeted more than 2.2% off the monthly highs with the decline breaking below the multi-week consolidation pattern we’ve been tracking.

The sell-off takes price into a key lateral level of support here at 1.3052/58- a region defined by the yearly low-week close and the 38.2% retracement of the 2017 advance – look for a reaction here. The immediate downside bias may be vulnerable near-term IF this holds.

Weekly resistance stands at the monthly high-week reversal close at 1.3192 with a break lower form here exposing subsequent support objectives at 1.2972 and the lower parallel at 1.2863/85 – an area of interest for possible downside exhaustion IF reached.

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 breakdown is testing the first major support target at 1.3052/58 and a break / close below is needed to mark resumption of broader downtrend. From a trading standpoint, a good spot to reduce short-exposure / lower protective stops. We’ll favor fading strength while below 1.32, ultimately targeting break of this key support zone. Review my latest Canadian Dollar Price Outlook for a closer look at the near-term USD/CAD technical trading levels.

Canadian Dollar Trader Sentiment – USD/CAD Price Chart

Canadian Dollar Trader Sentiment - USD/CAD Price Chart - Loonie Trade Outlook - Technical Forecast
  • A summary of IG Client Sentiment shows traders are net-long USD/CAD - the ratio stands at +2.57 (71.99% of traders are long) – bearish reading
  • Long positions are 8.47% higher than yesterday and 37.88% higher from last week
  • Short positions are7.72% higher than yesterday and 19.83% lower 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. Traders are further net-long than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger USD/CAD-bearish contrarian trading bias from sentiment standpoint.

See how shifts in Loonie retail positioning are impacting trend- Learn more about sentiment!

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Previous 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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