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Canadian Dollar Price Outlook: USD/CAD Initializes Bullish Break Out

Canadian Dollar Price Outlook: USD/CAD Initializes Bullish Break Out

Peter Hanks, Strategist

USD/CAD Price Forecast:

  • USD/CAD consolidated between 1.3345 and 1.2951 for months
  • A break above resistance may allow the pair to continue higher in the days to come
  • IG Client Sentiment Data reveals retail traders remain overwhelmingly short USD/CAD, a potential sign of further bullishness

Canadian Dollar Price Outlook: USD/CAD Initializes Bullish Break Out

USD/CAD rallied above resistance last week as risk aversion ran rampant and stocks were battered beneath support on fears the coronavirus will hamstring the global economy. In turn, crude oil entered deeper into a bear market as the demand outlook for the commodity was reassessed. Together, the two developments – risk aversion and weaker global growth expectations – likely played major roles in the USD/CAD break out.

With technical resistance at 1.3345 pierced as a result, the pair can look to continue higher after months of consolidation. Further, near-term retracements will have to negotiate prior topside barriers as they turn to support. With that in mind, it seems as though USD/CAD is poised to continue higher and target possible resistance around 1.3446 and 1.3500 if it can successfully hold above 1.3345 in the days ahead.

USD/CAD Price Chart: Daily Time Frame (May 2018 – March 2020)

Canadian Dollar Price Outlook: USD/CAD Initializes Bullish Break Out

While there are bullish cases to be made, a continuation higher is far from certain and is unlikely to occur in a single move. A long upper wick on Friday’s daily candle hints at waning bullish interest and the pair has already probed support early in Monday trading. Consequently, a break beneath 1.3345 may see USD/CAD request further assistance at the ascending trendline and 200-day simple moving average around 1.3200 in the days to come.

Still, IG Client Sentiment Data suggests the pair may continue higher in the weeks ahead. In the meantime, follow @PeterHanksFX on Twitter for updates.

--Written by Peter Hanks, Junior Analyst for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

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

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