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Canadian Dollar Technical Outlook: Loonie Rally Slams USD/CAD into Support

Canadian Dollar Technical Outlook: Loonie Rally Slams USD/CAD into Support

2020-06-01 18:30:00
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 breakdown testing key support zone into monthly open
  • Immediate focus is on 1.36 support zone – risk is slower sub-1.3855

The US Dollar is down more than 7% since the March highs against the Canadian Dollar with USD/CAD now probing key near-term support into the start of June trade. These are the updated targets and invalidation levels that matter on the USD/CAD price charts heading into the monthly open. 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 note to be on the lookout for, “topside exhaustion ahead of the late-March trendline IF price is indeed heading lower with a break below the objective May opening-range needed to fuel the next leg lower in price.” USD/CAD broke below the monthly opening-range on May 26th with the decline now testing a critical support zone at 1.3602/10 – a region defined by the 61.8% Fibonacci retracement of the yearly range and the 100% extension of the decline off the March high.

The focus is on this threshold today with a break / close below needed to keep the short-bias viable with subsequent support objectives at the Mary 2019 high-day close at 1.3515 and the March / 2017 opens at 1.3433/35. Daily resistance at 1.3855 with broader bearish invalidation at the April low-day close / May open at 1.3945.

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 trading within the confines of a near-term descending pitchfork formation with a break below the median-line today challenging the 1.3602/10 support zone- look for a reaction here. Initial resistance back at 1.3708 backed by the 1.3793-1.3812. Recoveries should be capped by the April opening-range lows at 1.3855 IF price is indeed heading lower.

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Bottom line: The Canadian Dollar rally has taken USD/CAD into a key near-term support zone and we’re looking for a reaction down here today. From at trading standpoint, a good region to reduce short-exposure / lower protective stops – be on the lookout for topside exhaustion while below 1.38 with a break keeping the focus on support objectives into the lower parallels. Keep in mind we have the BoC on tap this week alongside US non-farm payroll (NFP) and Canada employment on Friday- stay nimble. 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 - Trade Outlook - Technical Forecast
  • A summary of IG Client Sentiment shows traders are net-short USD/CAD - the ratio stands at –1.04 (48.91% of traders are long) – neutral reading
  • Long positions are2.00% lower than yesterday and 5.28% higher from last week
  • Short positions are44.10% higher than yesterday and 18.82% 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.
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Change in Longs Shorts OI
Daily -8% 9% -3%
Weekly -23% -9% -19%
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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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