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Canadian Dollar Price Outlook: USD/CAD Returns to Range Support

Canadian Dollar Price Outlook: USD/CAD Returns to Range Support

Michael Boutros, Strategist

Canadian Dollar Technical Price Outlook: Near-term Trade Levels

  • Canadian Dollar updated technical trade levels – Daily & Intraday Charts
  • USD/CAD sell-off breaks consolidation / weekly range lows post-BoC
  • Key near-term support 1.3432 - Key resistance zone back at 1.3602/10

The Canadian Dollar is on the offensive against the US Dollar on the heels of today’s Bank of Canada interest rate decision with the USD/CAD breaking below a near-term consolidation formation just below resistance. The move risks further declines near-term with price now approaching a key support zone near the monthly range-lows. 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.

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 noted that USD/CAD had, “rebounded off confluence support last week and the focus is on this near-term recovery. From a trading standpoint, look for topside exhaustion ahead of 1.3832 IF price is indeed heading lower.” Price registered a high at 1.3715 late in June trade before plummeting more than 1.6% into the July open. The monthly opening-range has taken shape just below confluence Fibonacci resistance at 1.3602/10- a region defined by the 61.8% retracement of the 2020 range and the 100% extension of the decline off the yearly highs. The bulls remain vulnerable below this threshold.

Daily support rests with the 61.8% retracement at 1.3468 backed by 1.3432- a break / close below this levels is needed to fuel a leg lower in price with such a scenario exposing the 78.6% retracement / June low at 1.3315/23. A breach above the monthly rang high at 1.3715 would be needed to shift the focus back to the long-side.

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 breaking below a near-term ascending consolidation pattern today with the decline probing a break of the weekly opening-range lows. A break below the 78.6% retracement at 1.3524 keeps the focus on the 25% parallel (currently ~1.35) backed by confluence support at 1.3468/86and the median-line / 1.3432- both levels of interest for possible downside exhaustion IF reached. Weekly open resistance stands at 1.3582 with bearish invalidation now lowered to 1.3610.

Bottom line: We’re looking for a break of the monthly opening-range for guidance with the risk weighted to the downside while below 1.3610. From a trading standpoint, look for topside exhaustion ahead of weekly open resistance IF price is indeed heading lower with a break below 1.3432 needed to mark resumption. Ultimately, a larger correction may offer more favorable opportunities closer to trend support. 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-long USD/CAD - the ratio stands at +1.18 (54.13% of traders are long) – neutral reading
  • Long positions are1.75% lower than yesterday and 4.65% higher from last week
  • Short positions are10.67% higher than yesterday and 5.53% 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

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Key US / Canada Data Releases

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

Economic Calendar - latest economic developments and upcoming event risk.

Active Trade Setups

- 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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