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Canadian Dollar Price Forecast: USD/CAD Threatens Breakout, Inflation on Deck

Canadian Dollar Price Forecast: USD/CAD Threatens Breakout, Inflation on Deck

James Stanley, Senior Strategist

Canadian Dollar Technical Price Outlook: USD/CAD Weekly Trade Levels

  • USD/CAD is testing a big spot on the chart at 1.2622.
  • Reversal themes remain strong in the pair and tomorrow’s economic calendar brings both Canadian inflation and FOMC meeting minutes, which can keep the pair on the move.
  • The analysis contained in article relies on price action and chart formations. To learn more about price action or chart patterns, check out our DailyFX Education section.
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The USD/CAD recovery has continued after last week’s test at a very key area on the chart. The 1.2500 psychological level has had pull in USD/CAD price action since March of this year; and that price makes up the bottom portion of a longer-term zone on the chart that spans up to the 1.2622 Fibonacci level. And as looked at last week, that price was also confluent with a trendline that can be found by connecting swing lows from early-June and late-July trade.

If you’d like to learn more about drawing trendlines, check out DailyFX Education

USD/CAD Four-Hour Price Chart

USDCAD Four Hour Price Chart

Chart prepared by James Stanley; USDCAD on Tradingview

After a rather pensive test of support last week, with the US Dollar falling on the heels of consumer sentiment data released on Friday, bulls sparked a topside push shortly after the open this week. Prices have run up to the topside of the support zone, with the 1.2622 Fibonacci level helping to hold the highs for now.

This keeps the door open for breakout potential, but given the failure to breakthrough that level at this point combined with what’s on the horizon, prudence may be the most attractive path forward. Tomorrow brings Canadian inflation data and later in the session, we’ll get FOMC meeting minutes from the July rate decision. That meeting produced a net result of USD weakness as Powell assuaged market fears around an upcoming taper discussion; but the big question now is whether the details of that meeting will help to soften the USD after a really strong start to the week.

On a shorter-term basis, there’s support potential around prior resistance, plotted at around 1.2588. Below that is the bullish trendline projection, and this currently plots to around 1.2550. And below that is another possible point of support at the same 1.2521 level that was showing as resistance last week.

To learn more about psychological levels, check out DailyFX Education

USD/CAD Two-Hour Price Chart

USDCAD Two Hour Price Chart

Chart prepared by James Stanley; USDCAD on Tradingview

USD/CAD Longer-Term: A Big Spot

Taking a step back on the chart to illustrate the relevance of the current zone and this highlights how this recent bullish move is but a small part of the longer-term picture in the pair. But – the 23.6% Fibonacci retracement of the 2020-2021 sell-off is just beyond the 1.2622 level, plotting specifically at 1.2652, and a breach above that price exposes a possible run up towards the 1.3000 psychological level. The 38.2% retracement of that major move plots just above the round level, and this creates a ‘zone’ for that next spot of potential long-term resistance.

To learn more about Fibonacci, check out DailyFX Education

USD/CAD Weekly Price Chart

USDCAD Weekly 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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