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Canadian Dollar Outlook: USD/CAD Slams into Resistance- Loonie Levels

Canadian Dollar Outlook: USD/CAD Slams into Resistance- Loonie Levels

Michael Boutros,
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The Canadian Dollar is down more-than 0.86% against the US Dollar this week with USD/CAD poised to mark an outside-weekly reversal off support on Friday. The rebound takes price into downtrend resistance and leaves the immediate advance vulnerable into the close- we’re looking for a reaction here into the November open for guidance. These are the updated targets and invalidation levels that matter on the USD/CAD price charts. Review my latestWeekly 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 - Loonie Trade Outlook - Technical Forecast

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

Technical Outlook: In my latest Canadian Dollar Price Outlook we noted that USD/CAD was, “approaching the first main support hurdle here at 1.3050- threat of near-term downside exhaustion.” Price briefly registered a low at 1.3042 early in the week before posting an outside-day reversal higher with the three-day rally taking out targets into downtrend resistance extending off the October highs- looking for a reaction up here.

A topside breach exposes the October open / 61.8% retracement at 1.3231/40 – a close above this threshold would be needed to validate a breakout. Initial support at 1.3145 backed by the October low-day reversal close at 1.3086. Ultimately, a close below 1.3050/58 is needed to mark resumption of the broader downtrend in USD/CAD.

Canadian Dollar Price Chart – USD/CAD 240min

Canadian Dollar Price Chart - USD/CAD 240min - Loonie Trade Outlook - Technical Forecast

Notes: A closer look at Loonie price action shows USD/CAD testing the upper bounds of the descending pitchfork formation we’ve been tracking off the September / October highs for the second time on the back of today’s US Non-Farm Payroll (NFP) report. IF this fails, look for a break below 1.3134 to challenge the low-day close at 1.3086 and 1.3050- risk for an accelerated decline if this level gives way. Strength above 1.3231 is needed to keep the recent recovery viable with such a scenario once again eyeing a drive towards key resistance at 1.3335/55.

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Bottom line: The USD/CAD recovery is testing downtrend resistance here and leaves the immediate long-bias vulnerable into the start of the month while below this slope- risk for topside exhaustion. From a trading standpoint, a good spot to reduce long-exposure / raise protective stops – IF this holds, look for a break below the 61.8% parallel to get this going.Review my latest Canadian Dollar Weekly Outlook for a closer look at the longer-term USD/CAD technical trading levels.

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

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 +1.42 (58.64% of traders are long) – bearish reading
  • Long positions are0.90% lower than yesterday and 31.52% lower from last week
  • Short positions are1.30% higher than yesterday and 4.71% higher 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. Yet traders are less net-long than yesterday and compared with last week and the recent changes in sentiment warn that the current USD/CAD price trend may soon reverse higher despite the fact traders remain net-long.

See how shifts in USD/CAD retail positioning are impacting trend- Learn more about sentiment!


Key US / Canada Data Releases

US / Canada Economic Calendar - USD/CAD Key Data Releases

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.