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Canadian Dollar Price Outlook: USD/CAD Rally at Risk- NFP Levels

Canadian Dollar Price Outlook: USD/CAD Rally at Risk- NFP Levels

2020-03-05 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 2020 rally testing multi-month downtrend resistance
  • Key US / Canada event risk on tap tomorrow: NFPs & Canada Employment

The Canadian Dollar is softer against the US Dollar this week with USD/CAD setting its weekly opening range just below the technical resistance near the February highs. The rally may be vulnerable heading into tomorrows US Non-Farm Payroll & Canada employment releases as price struggles near trend extremes. These are the updated targets and invalidation levels that matter on the USD/CAD price charts heading into Jobs Friday. 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 cited that the USD/CAD breakout was, “approaching the first major resistance hurdle on this multi-week advance.” The level in focus was 1.3383/92 with a breach / close above, “needed to validate a larger reversal in price with such a scenario exposing channel resistance (red) / the 2017 open at 1.3435.” Note that the March open registered at 1.3433 - price briefly registered a high at 1.3465 before reversing sharply with daily resistance steady at this threshold.

A breach / close above is needed to fuel the next leg higher with subsequent resistance objectives eyed at the upper parallel / 78.6% retracement at 1.3512. Initial daily support steady at 1.3330/35 with broader bullish invalidation at 1.3276.

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 sees USD/CAD continuing to trade within the confines of an ascending pitchfork formation extending off October / December lows with the median-line offering support this week. The weekly opening-rangeis set and we’re looking for the break for guidance with the immediate long-bias at risk while below last week’s high. A break lower would look to challenge 1.3269/76- look for a bigger reaction there IF reached – a break lower would expose the 50% retracement / uncovered close at 1.3208/21. Channel resistance is eyed at 1.3480s with the next major resistance level at 1.3512.

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Bottom line: The USD/CAD rally is testing broader downtrend resistance with the immediate advance vulnerable heading into major event risk tomorrow. From a trading standpoint, a good spot to reduce long-exposure / raise protective stops. Look for possible topside exhaustion on a spike tomorrow with a break below the 1.32-handle ultimately needed to suggest a more significant high was registered last week. 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 –1.66 (37.55% of traders are long) – bullish reading
  • Long positions are26.83% higher than yesterday and 16.42% higher from last week
  • Short positions are1.33% lower than yesterday and 17.62% 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.
USD/CAD MIXED
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Change in Longs Shorts OI
Daily -2% -13% -10%
Weekly 5% 21% 15%
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Key US / Canada Data Releases

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

Economic Calendar - latest economic developments and upcoming event risk.

Active Trade Setups

- 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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