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Canadian Dollar Price Outlook: USD/CAD Breakout Targets Trend Extreme

Canadian Dollar Price Outlook: USD/CAD Breakout Targets Trend Extreme

2020-02-27 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 breakout targeting multi-year downtrend resistance
  • Long-bias at risk heading into the 1.34-handle

The Canadian Dollar is back on the defensive against the US Dollar this week with a breakout in USD/CAD taking price back towards the October highs. While the near-term focus remains higher, the advance is now approaching multi-year down-trend resistance and the immediate advance may be vulnerable heading into the 1.34-handle. 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 - 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 the USD/CAD decline was approaching the, “lower parallel, currently ~1.3210s with a break below 1.3174/85 ultimately needed to suggest a larger reversal is underway..” Price registered a low at 1.3202 last week before rebounding with a breach above key resistance today at 1.3330/36 fueling a gain of more than 0.2% ahead of the New York open.

The next key resistance zone is eyed at 1.3383/92- a region defined by the September swing high and the 61.8% retracement of the decline off the late-2018 high. Note that the upper parallel of the broad descending pitchfork formation we’ve been tracking and further highlights the technical significance of this level. A breach / close above is needed to validate a larger reversal in price with such a scenario exposing channel resistance (red) / the 2017 open at 1.3435.

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 continuing to trade within the confines of an ascending channel extending off monthly lows. A break of the objective weekly opening-range highs keeps the focus higher in price with initial topside resistance objectives eyed at 1.3383/92- look for a reaction there If reached. Initial support rests at 1.3330 with near-term bullish invalidation now raised to 1.3307- weakness beyond this threshold would shift the focus back towards weekly open support at 1.3252 backed by the monthly open at 1.3236 and the uncovered close at 1.3221.

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Bottom line: The USD/CAD breakout is approaching the first major resistance hurdle on this multi-week advance. From a trading standpoint, look to reduce long-exposure / raise protective stops on a test of the 1.3383/92 resistance zone - ultimately, we’re looking for a reaction / topside exhaustion there with the broader advance vulnerable heading into this resistance confluence. 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 –2.24 (30.82% of traders are long) – bullish reading
  • Long positions are1.50% lower than yesterday and 13.91% higher from last week
  • Short positions are6.52% lower than yesterday and 27.68% 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 & compared with last week and the recent changes in sentiment warn that the current USD/CAD price trend may soon reverse lower despite the fact traders remain net-short.
USD/CAD MIXED
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -13% -2% -9%
Weekly 5% -14% -3%
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Key US / Canada Data Releases

USD/CAD Economic Calendar - Loonie Event Risk - 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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