Canadian Dollar Price Outlook: USD/CAD Breakout Under Review

Canadian Dollar Technical Price Outlook: Near-term Trade Levels

• Canadian Dollar updated technical trade levels – Daily & Intraday Charts
• USD/CAD near-term breakout vulnerable into 1.4260
• Constructive while above 1.39

The US Dollar pressed higher against the Canadian Dollar this week with USD/CAD up more than 1% since the Sunday open. A near-term price breakout could see some further gains but the advance remains vulnerable while below the yearly high-week close. These are the updated targets and invalidation levels that matter on the USD/CAD price charts heading into the close of the week. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this Loonie trade setup and more.

Canadian Dollar Price Chart – USD/CAD Daily

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 rally was, “testing lateral resistance here at 1.4534/65 and the immediate advance may be vulnerable IF price holds this threshold into the close.” Price tested this resistance threshold for five consecutive days before reversing sharply lower into the close of March trade.

A topside break of the weekly opening-range yesterday has fueled a near-term recovery in price with the rally eyeing initial daily resistance at the 38.2% retracement of the recent decline at 1.4166. Broader bearish invalidation stands at the yearly high-week close / 61.8% retracement at 1.4336/57. Initial daily support rest at the monthly low-day close at 1.3903 backed by key support at the 2017 highs / 50% retracement of the yearly range at 1.3793-1.3812.

Canadian Dollar Price Chart – USD/CAD 120min

Notes: A closer look at Loonie price action shows USD/CAD trading within the confines of an ascending pitchfork formation after breaching downtrend channel resistance yesterday. Initial resistance objectives eyed at 1.4166 and 1.4261- a region of interest for possible topside exhaustion IF reached. Monthly open support rests at 1.4058 backed by the highlighted trendline confluence around 1.3950s. Ultimately a break below 1.3920 would be needed to invalidate the near-term long-bias.

Bottom line: A near-term breakout in USD/CAD keep the immediate focus weighted to the topside but we’re looking for an exhaustion high just higher. From a trading standpoint, look to reduce long-exposure / raise protective stops on a stretch towards the upper parallel with the recovery still vulnerable while below 1.4357. A break below 1.39 would be needed to fuel the next leg lower 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

• A summary of IG Client Sentiment shows traders are net-short USD/CAD - the ratio stands at –1.44 (41.06% of traders are long) – weak bullish reading
• Long positions are18.24% higher than yesterday and 39.58% higher from last week
• Short positions are2.12% higher than yesterday and 14.01% 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. From a sentiment standpoint, the recent changes in positioning warn that the current USD/CAD price trend may soon reverse lower despite the fact traders remain net-short.

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Key US / Canada Data Releases

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