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Canadian Dollar Forecast: USD/CAD Rips on Fed- Loonie Breakout Levels

Canadian Dollar Forecast: USD/CAD Rips on Fed- Loonie Breakout Levels

Michael Boutros, Strategist

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

  • Canadian Dollarupdated technical trade levels - Weekly Chart
  • USD/CAD rebound off technical support fueled post-FOMC - downtrend resistance in view
  • Critical support 1.2048- Resistance 1.2444, Key resistance 1.2579-1.2635

The Canadian Dollar plummeted more than 2.4% against the US Dollar this week with the USD/CAD now up nearly 4% off multi-year lows registered into the open of June trade. The Fed-induced USD rally fueled a reversal off key support we’ve been tracking for weeks now with the advance now eyeing multi-month downtrend resistance – this is the first test on whether the USD/CAD rally is just a near-term recovery or a broader trend reversal. These are the updated targets and invalidation levels that matter on the USD/CAD weekly technical price charts. Review my latest Strategy Webinar for an in-depth breakdown of this Loonie technical setup and more.

Canadian Dollar Price Chart – USD/CAD Weekly

Canadian Dollar Forecast: USD/CAD Rips on Fed- Loonie Breakout Levels

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

Notes:In my last Canadian Dollar Weekly Price Outlook we noted that a, “rebound off downtrend support is vulnerable heading into major event risk this week with the FOMC interest rate decision and Canada Core Inflation on tap. From at trading standpoint, be on the lookout for a reaction on stretch towards the upper parallel – losses should be limited to the monthly open at 1.2058 IF price is indeed heading higher with a breach above 1.2365 ultimately needed to suggest a larger trend reversal is underway.” USD/CAD ripped higher post-FOMC with the rally breaching the 1.2365 threshold on Friday.

Initial weekly resistance now stands at the November trendline / 50% retracement of the yearly range at 1.2444. A breach / weekly close above would be needed to keep the immediate long-bias viable towards subsequent resistance objectives at the 2018 yearly open / 23.6% Fibonacci retracement of the 2020 decline at 1.2579-1.2635- look for a larger reaction there IF reached. Initial support now rests bac at the 2018 swing low at 1.2247 with a break below 1.2061/48 still needed to mark resumption of the broader downtrend towards the 2007 high / May 2015 swing low at 1.1879-1.1919.

Bottom line: The USD/CAD rebound off downtrend support is now testing multi-month downtrend resistance- looking for a reaction up here. From a trading standpoint, a good zone to reduce long-exposure / raise protective stops – losses should be limited to 1.2247 IF price is indeed heading higher with a breach / close above 1.2634 ultimately needed to suggest a more significant low is in place. Review my latest Canadian Dollar Price Outlookfor a closer look at the near-term USD/CAD technical trade levels.

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

Canadian Dollar Trader Sentiment – USD/CAD Price Chart

Canadian Dollar Forecast: USD/CAD Rips on Fed- Loonie Breakout Levels
  • A summary of IG Client Sentiment shows traders are net-long USD/CAD - the ratio stands at +1.90 (65.50% of traders are long) – typically bearish reading
  • Long positions are13.22% lower than yesterday and 34.03% lower from last week
  • Short positions are 7.80% higher than yesterday and 32.60% 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. Recent changes in sentiment warn that the current USD/CAD price trend may soon reverse higher despite the fact traders remain net-long.


US / Canada Economic Calendar

Canadian Dollar Forecast: USD/CAD Rips on Fed- Loonie Breakout Levels

Economic Calendar - latest economic developments and upcoming event risk.

Active 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.