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Canadian Dollar Price Outlook: USD/CAD Bucks Trend, Can Bulls Drive?

Canadian Dollar Price Outlook: USD/CAD Bucks Trend, Can Bulls Drive?

2020-06-16 18:41:00
James Stanley, Strategist
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Canadian Dollar Price Outlook:

  • USD/CAD has been in the midst of an intense sell-off over the past few weeks.
  • After perching above the 1.4000 spot in late-May, sellers drove the pair lower by more than 730 pips down to last week’s low.
  • Since last week’s low, a bit of recovery has shown – but a confluent zone of Fibonacci resistance has come into play that may thwart the continued advance.

From Range to Extreme Trends, Welcome to 2020

It’s been a strange first half of the year for the US Dollar, and a similar statement can be made for the Canadian Dollar, as well. When meshing the two currencies up in the USD/CAD pair, it’s been a pretty bewildering outlay so far in 2020 trade.

After spending much of 2019 trade in varying forms of range, strength showed around the 2020 open with USD/CAD pushing up to fresh six-month-highs in late-February. A gap through the 1.3500 handle saw a bullish breakout really take-hold, and a potent combination of both USD-strength and CAD weakness led to a robust breakout in mid-March; with the pair coming a mere 21 pips away from the 17-year high. And what started as a pullback in that bullish theme soon turned into a range, as buyers apparently wanted no part of testing that very obvious, looming high watermark on the charts. That range began to take on a bearish bias, as looked at in the article Canadian Dollar Price Outlook: USD/CAD Battles the Big Figure 1.4000.

Descending triangles are interesting formations to work with that will often be approached with a bearish bias. It consists of a horizontal level or zone of support coupled with a series of lower-highs on the resistance side; postulating that a continued bearish drive as denoted by the lower-highs may, eventually, break-below the horizontal support. That’s exactly what happened in USD/CAD in late-May as sellers began to have their way, pushing prices down by more than 730 pips as a decisive trend had shown in the pair.

USD/CAD Eight-Hour Price Chart

USDCAD Eight Hour Price Chart

Chart prepared by James Stanley; USDCAD on Tradingview

The recent bearish trend has appeared to bottom-out, at least temporarily, around a confluent support zone on the chart. This takes place around the 1.3315 level, and within mere pips has both the March low as well as the 78.6% retracement of the 2020 major move.

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USD/CAD Four-Hour Price Chart

USDCAD Four Hour Price Chart

Chart prepared by James Stanley; USDCAD on Tradingview

At this point, USD/CAD price action is battling another confluent zone, this time as resistance, showing around the 1.3600 spot on the chart. This zone offers both the 78.6% retracement of the March major move as well as the 61.8% retracement of the 2020 major move. Support is currently holding around the 1.3500 area after a failed test below earlier this morning.

USD/CAD BULLISH
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -12% -9% -11%
Weekly -7% 5% -3%
Current Retail Sentiment in USD/CAD
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This could possibly be an area where the trend flips, at least temporarily, provided that buyers can hold the low above that 1.3500 spot. Otherwise, the prior low around 1.3315 is vulnerable, particularly if this heavy theme of USD-weakness continues to show.

USD/CAD Hourly Price Chart

USDCAD USD/CAD Hourly 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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