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Canadian Dollar Forecast: USD/CAD Recovery Vulnerable – Loonie Levels

Canadian Dollar Forecast: USD/CAD Recovery Vulnerable – Loonie Levels

Michael Boutros, Strategist

Canadian Dollar Technical Forecast: Neutral

  • Canadian Dollar updated technical trade levels - Weekly Chart
  • USD/CAD recovery falters into yearly open- threat for larger correction
  • Weekly support 1.2460, 1.2314/66 (key) – Critical resistance 1.2975-1.3023
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The Canadian Dollar snapped a two-week winning streak against the US Dollar with USD/CAD up more than 0.9% ahead of the US close on Friday. Price closed well-off the weekly highs and while the broader outlook remains constructive, the threat for a larger correction looms while below the objective yearly open. 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.

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Canadian Dollar Price Chart – USD/CAD Weekly

USD/CAD

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

Notes:In last month’s Canadian Dollar Weekly Price Outlook we noted that the USD/CAD was approaching resistance while warning that, “A topside breach / close above the 52-week moving average is needed to validate a larger breakout here with such a scenario once again exposing the high-week close at 1.2774 and critical resistance into 1.2975-1.3023.” Price registered a high at 1.2949 last month before reversing sharply with Loonie now trading back below the 52—week moving average / objective 2021 yearly open at 1.2713. Although the reversal off the yearly lows does keep the broader outlook constructive, the threat remains for a deeper pullback while below this threshold.

Initial weekly support rests with the 2016 swing low at 1.2460 backed by a critical support zone 1.2306/66 – a region defined by the 100% extension, the 2018 low-close and 61.8% Fibonacci retracement of the yearly range.

Topside resistance back at 1.2713 and the yearly high-week close at 1.2822 with a breach / close above 1.2975-1.3023 still needed to fuel the next leg higher in price.

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Bottom line: The USD/CAD rebound remains vulnerable while below 1.2822- we’re on the lookout for a low in the weeks ahead. From a trading standpoint, look for possible downside exhaustion ahead of 1.23 IF prices are indeed heading higher with a breach above 1.3023 ultimately needed to validate a reversal of the March 2020 downtrend. Review my latest Canadian Dollar Price Outlook for 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

  • A summary of IG Client Sentiment shows traders are net-long USD/CAD - the ratio stands at +1.76 (63.81% of traders are long) – typically bearish reading
  • Long positions are7.58% higher than yesterday and 14.27% lower from last week
  • Short positions are 15.62% lower than yesterday and 18.13% 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. Traders are more net-long than yesterday but less net-long from last week. The combination of current positioning and recent changes gives us a further mixed USD/CAD trading bias from a sentiment standpoint.
USD/CAD Bearish
Data provided by
of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 12% -3% 1%
Weekly 1% -12% -9%
Learn how shifts in USD/CAD retail positioning impact trend
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--- 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.

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