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Canadian Dollar Outlook – USD/CAD Set for Breakout Year in 2020

Canadian Dollar Outlook – USD/CAD Set for Breakout Year in 2020

Paul Robinson,
What's on this page

USD/CAD Technical Highlights:

  • USD/CAD smallest annual range since 1996
  • Price coiling, convergence in trend-lines near

The US Dollar’s annual trading range when looking at the US Dollar Index (DXY) is the smallest since 1976, and with regard to USD/CAD, barring a sizable move in the next two weeks, it will post the smallest range since 1996, but only by a small margin (4.7% vs 4.3%) before it would match 1989 (4.7%).

The fact that price has become so compressed on an annualized basis, and that the quarterly ranges have become sequentially smaller throughout the year (similar to a wedge pattern) suggests that a range expansion is in order next year, and also that it is likely to begin sooner rather than later.

With the stage set for a breakout in volatility, there is also a couple of trend-lines converging on one another from 2012 and 2016. These lines are set to intersect by February at the latest, which is supportive of an early Q1 breakout.

A break above the 2016 trend-line and 13382 is seen as having USD/CAD in bullish breakout mode, while a break below the 2012 trend-line and 13000 is seen as having the pair selling off.

Targets yet to be determined. A lot has to do with the power of the breakout, as a rally to 14500 or better or a sell-off to 12000 or lower are both within scope. The average annual range in the past decade, including this year, was just over 11%.

At the immediate moment USD/CAD is hanging onto support via the 2012 trend-line on the weekly/2017 on the daily time-frame. Given the time of the year and how trading has been, a bounce from here looks like the next short-term move.

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USD/CAD Weekly Chart (trend-lines converging)

USD/CAD Weekly Chart (trend-lines converging)

USD/CAD Daily Chart (holding trend-line for now)

USD/CAD daily chart, holding trend-line for now

USD/CAD Charts by TradingView

***Updates will be provided on the above thoughts and others in the trading/technical outlook webinars held at 1030 GMT on Tuesday and Friday. If you are looking for ideas and feedback on how to improve your overall approach to trading, join me on Thursday each week for the Becoming a Better Trader webinar series.

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Whether you are a new or experienced trader, we have several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.

---Written by Paul Robinson, Market Analyst

You can follow Paul on Twitter at @PaulRobinsonFX

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