Canadian Dollar Outlook: USD/CAD Plummets into Support- Loonie Stall?
- USD/CAD breakdown testing initial support- risk is remains lower usb-1.32
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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.
Canadian Dollar Chart – USD/CAD Weekly
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
- 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!
Previous Weekly Technical Charts
- Euro (EUR/USD)
- Australian Dollar (AUD/USD)
- Crude Oil (WTI)
- Gold (XAU/USD)
- US Dollar (DXY)
- New Zealand Dollar (NZD/USD)
- Sterling (GBP/USD)
--- 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.