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Canadian Dollar Outlook: USD/CAD Bears Emerge, but Can they Drive?

Canadian Dollar Outlook: USD/CAD Bears Emerge, but Can they Drive?

Michael Boutros, Strategist

The Canadian Dollar is back on the offensive against US Dollar early in the week with USD/CAD paring a portion of the post-NFP advance. These are the updated targets and invalidation levels that matter on the USD/CAD weekly chart heading into FOMC. Review this week's Strategy Webinar for an in-depth breakdown of this Loonie price setup and more.

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Canadian Dollar 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

Notes: The Canadian Dollar has continued to trade within the confines of a modified descending pitchfork formation we’ve been tracking off the yearly highs with price failing at the 75% parallel for the third consecutive week on Friday. Key weekly support rests at the confluence of the median-line and the 61.8% retracement of the October advance at 1.3151- a break / close below this threshold is needed to mark resumption of the broader downtrend targeting the 1.3052/58 backed by the 100% ext at 1.2972. Initial weekly resistance stands with the 2016 trendline (currently near ~1.3330) with a breach / close above the yearly high-week close / 61.8% retracement at 1.3355/70 needed to suggest a larger breakout is underway.

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 responded downtrend support AND resistance into the open of the month and the immediate focus is on a break of last week’s range for guidance. While a downside break is ultimately favored, we cannot rule out another high into slope resistance before a larger turn. 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 Trade Outlook - Technical Forecast
  • A summary of IG Client Sentiment shows traders are net-short USD/CAD - the ratio stands at -1.72 (36.83% of traders are long) – bullish reading
  • Long positions are 25.87% higher than yesterday and 15.53% higher from last week
  • Short positions are21.23% higher than yesterday and 30.89% 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. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current USD/CAD price trend may soon reverse lower despite the fact traders remain net-short.

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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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