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Canadian Dollar Price Outlook: USD/CAD Recovery to Face Resistance

Canadian Dollar Price Outlook: USD/CAD Recovery to Face Resistance

Michael Boutros, Strategist

The Canadian Dollar is weaker this week but keeps price within the broader Loonie rally. Here are the levels that matter on the USD/CAD weekly chart.

The Canadian Dollar was weaker against the US Dollar this week with USD/CAD rallying 0.5% to trade at 1.3050 ahead of the New York close on Friday. While there may yet be some further upside, the broader technical focus remains at risk wile below downtrend resistance. These are the updated targets and invalidation levels that matter on the USD/CAD weekly price chart. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this Loonie trade setup and more.

Canadian Dollar Price Chart – USD/CAD Weekly

Canadian Dollar Price Chart

Chart Prepared by Michael Boutros, Technical Strategist; USD/CAD on Tradingview

Notes:In my last Canadian Dollar Weekly Price Outlook we noted that a five week decline had taken USD/CAD, “back towards key support at the lower bounds of a multi-month consolidation patter at 1.3052/58- look for a reaction there into the January open with a break / close below needed to keep the focus on subsequent objectives at the 100% Fibonacci extension at 1.2972 and 1.2863.” Price broke lower into the close of December with the decline registering a low at 1.2951 before rebounding this week.

The recovery failed back at the 1.3058 threshold and heading into next week the risk for further losses remain while below the median-line / 50% retracement of the November decline at 1.3140(near-term bearish invalidation). A break below 1.2972 would expose subsequent support objectives at the 50% retracement of the 2017 ascent at 1.2863- look for a bigger reaction there If reached.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

Bottom line: USD/CAD is rebounded off the 100% extension last this week and IF the decline off the 2017 highs was corrective, price should hold these lows. That said, the risk remains while below the median-line heading into next week. From a trading standpoint, look for topside exhaustion ahead of 1.3140 for possible entries but ultimately, we’re looking for a breakout of the 1.2972-1.3140 range for guidance as we head deeper into January trade. I’ll publish an updated Canadian Dollar Price Outlook once we get further clarity on the near-term USD/CAD technical trade levels.

Canadian Dollar Trader Sentiment – USD/CAD Price Chart

IG Client Sentiment
  • A summary of IG Client Sentiment shows traders are net-long USD/CAD - the ratio stands at +1.09 (65.46% of traders are long) – bearish reading
  • Long positions are17.45% lower than yesterday and 6.42% lower from last week
  • Short positions are12.15% higher than yesterday and 26.48% higher from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USD/CAD prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week and the recent changes in positioning warn that from a sentiment standpoint, the current USD/CAD price trend may soon reverse higher despite the fact traders remain net-long.

Previous Weekly Technical Charts

--- Written by Michael Boutros, Technical Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex

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