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Canadian Dollar Technical Price Outlook: Loonie Coils into May Range

Canadian Dollar Technical Price Outlook: Loonie Coils into May Range

2020-05-13 15:30:00
Michael Boutros, Strategist
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Canadian Dollar Technical Price Outlook: Near-term Trade Levels

  • Canadian Dollar updated technical trade levels – Daily & Intraday Charts
  • USD/CAD in consolidation within April trading range- broader March downtrend intact
  • Immediate focus is on a break of the 1.3945–1.4176 range for guidance

The US Dollar is up more than 0.90% against the Canadian Dollar this week with USD/CAD continuing to coil within the April range. These are the updated targets and invalidation levels that matter on the USD/CAD price charts heading into the close of the week. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this Loonie trade setup and more.

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Canadian Dollar Price Chart – USD/CAD Daily

Canadian Dollar Price Chart - USD/CAD Daily - Loonie Trade Outlook - Technical Forecast

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

Technical Outlook: In my last Canadian Dollar Price Outlook we warned to, “be on the lookout for topside exhaustion while below 1.4164..” Price registered at 1.4173 into the start of the month before pulling back with USD/CAD still trading within the April opening-range. Loonie price action has continued to trade within the confines of a descending channel formation off the late-March high with the May high now converging on trendline resistance – a breach / close above is needed to shift the broader focus back to the long-side. Initial daily support rests with the April low-day close / May open at 1.3945 with key support just lower at the 2017 high / 50% retracement at 1.3793-1.3812.

Canadian Dollar Price Chart – USD/CAD 120min

Canadian Dollar Price Chart - USD/CAD 120min - Loonie Trade Outlook - Technical Forecast

Notes: A closer look at Loonie price action shows USD/CAD trading within the a near-term consolidation pattern with an embedded descending pitchfork formation governing the decline. Price rebounded off the median-line into the open of the week with the recovery now testing slope resistance. A breach above the 61.8% extension at 1.41 is needed to keep the rebound viable targeting the highs. A break of the weekly range low keeps the focus on the April low at 1.3850 and 1.3793-1.3812- look for a larger reaction there IF reached.

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Bottom line: The Canadian Dollar is contracting within the April price range and the broader focus is on a breakout of the 1.3945–1.4176 range for guidance. From a trading standpoint, look for topside exhaustion ahead of the late-March trendline IF price is indeed heading lower with a break below the objective May opening-range needed to fuel the next leg lower in price. Review my latest Canadian Dollar Weekly Price Outlook for a closer look at the longer-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 Trader Sentiment - USD/CAD Price Chart - Loonie Trade Outlook - Technical Forecast
  • A summary of IG Client Sentiment shows traders are net-short USD/CAD - the ratio stands at –1.27 (44.40% of traders are long) – weak bullish reading
  • Long positions are 7.71% lower than yesterday and 0.25% lower from last week
  • Short positions are22.74% higher than yesterday and 13.15% lower from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USD/CAD prices may continue to rise. Traders are more net-short than yesterday but less net-short 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
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 13% -12% 2%
Weekly 8% -18% -4%
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Key US / Canada Data Releases

Key US / Canada Data Releases - USD/CAD Event Risk - Loonie Economic Calendar

Economic Calendar - latest economic developments and upcoming event risk.

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- Written by Michael Boutros, 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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