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Canadian Dollar Forecast: USD/CAD Slips to 7-Month Low

Canadian Dollar Forecast: USD/CAD Slips to 7-Month Low

Peter Hanks, Strategist

USD/CAD Price Outlook:

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)

usdcad price chart

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.

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)

usd/cad price chart

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

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

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