USD/CAD Price Outlook:
- USD/CAD fell to its lowest point since early January on Monday as USD weakness persists
- Without major support, will USD/CAD continue its decline?
- USD/CAD Under Pressure as BoC Highlights Limits of Monetary Policy
Canadian Dollar Forecast: USD/CAD Slips to 7-Month Low
The Canadian Dollar gained against its southern counterpart to start the week, sending USD/CAD to its lowest point since early January. As a result, the pair has retraced the entirety of its covid-related explosion and now looks to turn negative for the year. Coupled with fresh lows and a recent shift in the Fed’s policy, USD/CAD looks vulnerable to further weakness at this stage.
USD/CAD Price Chart: Daily Time Frame (December 2019 – August 2020)
With that in mind, support beneath the current trading price is relatively sparse which may allow for an extension lower. While the round 1.3000 level may provide a modicum of support, I would argue the 2019 low around 1.2953 might offer more influence. Either way, months of losses highlight persistent weakness which could overwhelm both areas of potential support.
| Change in | Longs | Shorts | OI |
| Daily | -23% | 18% | 2% |
| Weekly | -16% | 8% | 0% |
Further still, IG Client Sentiment Data reveals retail traders remain net-long USD/CAD despite recent price action. Since we typically take a contrarian view to IGCS, the data may also suggest more weakness ahead.
USD/CAD Price Chart: 4 – Hour Time Frame (June 2020 – August 2020)
That said, possible pull backs may allow for attractive entry opportunities. With resistance overhead around the 1.32 mark, a brief retracement might enhance the risk-reward profile of such a trade. Still, weakness is not guaranteed and a convincing break out above the descending trendline from early July could undermine the bearish outlook. In the meantime, follow @PeterHanksFX on Twitter for updates and analysis.
--Written by Peter Hanks, Strategist for DailyFX.com
Contact and follow Peter on Twitter @PeterHanksFX
