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Canadian Dollar Price Outlook: USD/CAD Breakout at Risk into FOMC

Canadian Dollar Price Outlook: USD/CAD Breakout at Risk into FOMC

2020-01-28 16:30:00
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 testing confluence resistance zone ahead of FOMC
  • Focus on close with respect to 1.3182/84 zone - constructive while above 1.3075

The Canadian Dollar is down more than 1.9% against the US Dollar since the January lows in USD/CAD with the recent price breakout now testing confluence resistance ahead of tomorrow’s FOMC interest rate decision. The immediate advance may be vulnerable near-term if price holds below this threshold on a daily close basis. These are the updated targets and invalidation levels that matter on the USD/CAD price charts heading into the Fed. 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 - Technical Forecast

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

Technical Outlook: In my last Canadian Dollar Price Outlook we noted that USD/CAD was in, “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.” A topside breach of last week saw price rally into a key Fibonacci confluence we’ve been tracking at 1.3182/84 – a region defined by the 61.8% retracement of the November decline and the 100% extension of the late-December advance. Loonie is straddling this zone today. Watch the close – a hold below this threshold would leave the immediate advance vulnerable / risk for exhaustion heading into FOMC tomorrow.

Canadian Dollar Price Chart – USD/CAD 120min

Canadian Dollar Price Chart - USD/CAD 120min - Loonie Trade Outlook - Technical Forecast

Notes: A closer look at Loonie price action sees USD/CAD trading within the confines of an ascending channel formation extending off the monthly lows with the upper parallel further highlighting near-term resistance today just above 1.3182/84. Weekly open support rests at 1.3153 with a break below 1.3134 needed to shift the focus lower with such a scenario eyeing subsequent support objectives at 1.3102/09 and the highlighted trendline confluence near ~1.3075– look for a larger reaction there IF reached. A topside breach from here exposes resistance targets at 1.3247 and the December open at 1.3270.

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Bottom line: USD/CAD is testing confluence resistance here and the immediate focus is on a the daily close with respect to 1.3182/84. From at trading standpoint, a good spot to reduce long-exposure / raise protective stops – be on the lookout for possible topside exhaustion while below this threshold. That said- ultimately, the outlook remains constructive while within this formation with a breach needed to fuel the next leg higher in price. 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 Trade Outlook - Technical Forecast
  • A summary of IG Client Sentiment shows traders are net-short USD/CAD - the ratio stands at -1.55 (39.19% of traders are long) – bullish reading
  • Long positions are2.33% higher than yesterday and 33.62% lower from last week
  • Short positions are19.80% higher than yesterday and 13.54% higher 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. Traders are further net-short than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger USD/CAD-bullish contrarian trading bias from a sentiment standpoint.
USD/CAD MIXED
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -3% -14% -8%
Weekly -35% 19% -17%
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Key US / Canada Data Releases

US / Canada Key Data Releases - USD/CAD Economic Calendar - Loonie Trade Outlook

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.

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