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Canadian Dollar Price Outlook: Loonie Breakdown Propels USD/CAD

Canadian Dollar Price Outlook: Loonie Breakdown Propels USD/CAD

James Stanley, Senior Strategist

Canadian Dollar Talking Points:

  • Canadian Dollar breaks down after yesterdays Bank of Canada rate decision.
  • USD/CAD is trading at fresh 2020 highs.

Bank of Canada Drives Loonie Weakness, USD/CAD Jumps

Yesterday brought a couple of notable risk items for the Canadian Dollar, with the early-morning CPI release followed by a Bank of Canada rate decision. The big driver yesterday was the commentary, as the BoC sounded far less optimistic than they had previously as Stephen Poloz noted that policymakers were unsure whether the recent slowdown in data was transitory or being driven by less-controllable global factors. This amounted to a quick run of weakness in the Canadian Dollar and that move has continued through the overnight session. USD/CAD is now trading at a fresh 2020 high, breaking through two key resistance zones as buyers further clawed back the late-2019 sell-off in the pair.

USD/CAD Four-Hour Price Chart

usdcad four hour price chart

Chart prepared by James Stanley; USDCAD on Tradingview

On a short-term basis, there’s even been signs of support at prior resistance even after yesterday’s bullish breakout in USD/CAD. The level of 1.3132, which is the 61.8% retracement of the May-September 2017 major move has come in to offer a bit of higher-low support near yesterday’s US close; and a bit higher, around the 1.3150 marker, buyers appear to be trying to do the same with this level helping to hold this morning’s low.

USD/CAD Hourly Price Chart

usdcad hourly price chart

Chart prepared by James Stanley; USDCAD on Tradingview

USD/CAD Moving Forward – Levels to Know

At this point, additional resistance potential exists just a bit-higher on the chart, running from the approximate 1.3181-1.3205. This zone caught a group of swing highs in mid-December and should this bullish move in USD/CAD continue, that zone could be an area to follow for exhaustion.

Underneath current price action and those two quick stops of higher-low support from the past 24 hours, deeper support potential exists around the 1.3100 level, which came in as a key spot of resistance earlier this month but, as yet, hasn’t been tested for support since yesterday’s bullish breakout.

USD/CAD Four-Hour Price Chart

usdcad four hour price chart

Chart prepared by James Stanley; USDCAD on Tradingview

--- Written by James Stanley, Strategist for DailyFX.com

Contact and follow James on Twitter: @JStanleyFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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