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

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

2020-01-13 20:30:00
Michael Boutros, Strategist
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Canadian Dollar Technical Price Outlook: Near-term Trade Levels

  • Canadian Dollar updated technical trade levels – Daily & Intraday Charts
  • USD/CAD weekly opening-range taking shape just above technical support – pending breakout
  • Outlook remains constructive near-term while above 1.3024

The Canadian Dollar is virtually unchanged against the US Dollar since the Asia-open this week with USD/CAD trading just above near-term uptrend support. Last week’s pullback in price covered nearly half of the January range thus far and its decision time for the Loonie as we head deeper into the week. These are the updated targets and invalidation levels that matter on the USD/CAD price charts. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this Loonie trade setup and more.

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Canadian Dollar Price Chart – USD/CAD Daily

Canadian Dollar Price Chart - USD/CAD Daily - Loonie Trade Outlook - Techncial Forecast

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

Technical Outlook: In my last Canadian Dollar Price Outlook we noted that, “The USD/CAD sell-off is testing the first major support target and while the broader outlook remains weighted to the downside, the immediate decline may be vulnerable while above the 1.2971.” Price registered a low at 1.2957 early in the month before rebounding with the rally failing last week at the December 18th swing lows around 1.31-handle.

Loonie remains within the confines of a descending pitchfork formation extending off the September / December highs with price currently siting just above the median-line. Daily resistance eyed at the 75% parallel / 1.31 with a breach / close above 1.3134/40 needed to fuel the next leg higher in price.Key confluence support rests with the yearly open / 100% extension / 78.6% retracement at 1.2971/75 – a break / close below this threshold would be needed to mark resumption of the broader downtrend targeting 1.2916 and the 50% retracement at 1.2861.

Canadian Dollar Price Chart – USD/CAD 60min

Canadian Dollar Price Chart - USD/CAD 60mnin

Notes: A closer look at Loonie price action sees USD/CAD trading within the confines of an ascending pitchfork extending off the December / January lows with the weekly opening-range taking shape just above the lower parallel. Near-term support rests 1.3024/28 backed by the 61.8% retracement at 1.3010 – weakness beyond this threshold would suggest a larger turn is underway targeting 1.2971/75. Initial resistance at 1.3076 backed by subsequent topside objectives at the median-line / 1.31 and 1.3134/40- look for a larger reaction there IF reached (area of interest for possible topside exhaustion / short-entries).

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Bottom line: USD/CAD is in a near-term consolidation just above uptrend support and the immediate focus is on a break of the weekly opening-range for guidance. From a technical standpoint, the setup remains constructive while within this formation, but we’ll respect a break of the 1.3024-1.3076 range. From a trading standpoint, look to reduce short-exposure / lower protective stops on a test of 1.3024/28- and area of interest for possible downside exhaustion / entries IF price is indeed heading higher on this advance. Review my latest Canadian Dollar Weekly Price Outlook for a closer look at the longer-term USD/CAD technical trade 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 Technical Outlook
  • A summary of IG Client Sentiment shows traders are net-long USD/CAD - the ratio stands at +1.35 (57.51% of traders are long) – bearish reading
  • Long positions are16.67% higher than yesterday and 24.15% lower from last week
  • Short positions are17.92% higher than yesterday and 52.74% 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 & 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.
USD/CAD BULLISH
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 15% 27% 18%
Weekly -20% 0% -14%
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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.

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