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Canadian Dollar Price Outlook: Loonie on Offense as Oil Stabilizes

Canadian Dollar Price Outlook: Loonie on Offense as Oil Stabilizes

Michael Boutros, Strategist

Canadian Dollar Technical Price Outlook: Near-term Trade Levels

  • Canadian Dollar updated technical trade levels – Daily & Intraday Charts
  • USD/CAD breaks near-term uptrend support- weekly opening range intact
  • Risk for further losses sub-1.4164, Key support 1.3903/20

The US Dollar is up 0.65% against the Canadian Dollar this week with USD/CAD continuing to contract within the April range. Stabilization in the crude oil markets may offer support for the Loonie in the days ahead with price responding to monthly trend resistance this week. 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.

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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, “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.” A parallel off the March / April lows has continued to govern the topside for now with the advance faltering at confluence resistance near the 50% retracement of the March decline at 1.4261. Despite a monthly range of more than 3%, USD/CAD is only fractionally higher in April with the weekly opening-range preserved just above the monthly open at 1.4058.

Note that daily RSI has virtually flat-lined just above the 50-threshold - look for a break of the 40-60 range in the days ahead for guidance from a momentum standpoint. Daily support rests with the low-day close with a critical confluence region just lower at 1.3793-1.3812- looking for a bigger reaction there IF reached. A topside breach of the monthly downtrend slope would keep the focus on key resistance at 1.4336/57.

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 shows USD/CAD breaking below the ascending pitchfork formation we’ve been tracking since last week with the lower parallel offering initial resistance early in New York. While this break would normally shift our focus lower, it’s important to note that the weekly opening-range remains above weekly open support / 61.8% retracement at 1.4011/14- a break / close below this threshold is needed to keep the immediate short bias viable with such a scenario exposing the 78.6% retracement at 1.3943 and key support at the late-March swing low / April low-day close at 1.3903/20.

A topside breach above former pitchfork support would risk a larger rebound with subsequent resistance objectives 1.4133 and the 61.8% retracement of the weekly range at 1.4164– we’ll preserve this threshold as our near-termbearish invalidation level.

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Bottom line: The Canadian Dollar has maintained a near-term price range just above weekly open support – break for guidance. From a trading standpoint, be on the lookout for topside exhaustion while below 1.4164 with a break below the weekly open needed to fuel a 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

Canadian Dollar Trader Sentiment - USD/CAD Price Chart - Loonie Positioning - Technical Forecast
  • A summary of IG Client Sentiment shows traders are net-short USD/CAD - the ratio stands at –1.12 (47.14% of traders are long) – weak bullish reading
  • Long positions are17.34% lower than yesterday and 9.30% lower from last week
  • Short positions are1.23% lower than yesterday and 12.12% 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 BEARISH
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 24% -19% 9%
Weekly 18% -8% 10%
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Key US / Canada Data Releases

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