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Canadian Dollar Outlook: USD/CAD Plummets to Major Uptrend Support

Canadian Dollar Outlook: USD/CAD Plummets to Major Uptrend Support

2020-08-05 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 sell-off approaching critical long-term uptrend support around ~1.32
  • Key near-term resistance at 1.34 – break lower exposes 1.31

The Canadian Dollar offensive against the US Dollar continues into the start of August trade with USD/CAD breaking to fresh five-month lows. The decline takes price into a critical slope at long-term uptrend support and we’re looking for a reaction in price just lower. 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 - US Dollar vs Canadian Dollar Trade Outlook - Loonie Technical Forecast

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

Technical Outlook: In my last Canadian Dollar Price Outlook we highlighted that our focus was on, “a break of the monthly opening-range for guidance with the risk weighted to the downside while below 1.3610.” USD/CAD registered an intraday high at 1.36 the following day before reversing sharply lower to break below the July opening-range lows and keeps the risk weighted to the downside near-term.

The decline is now approaching confluence support around ~1.3202 where the February lows converges on multi-year pitchfork support extending off the 2017 lows- look for a reaction there IF reached. A break lower keeps the focus on the 88.6% Fibonacci resistance at 1.3152 and the lower parallel (magenta) near ~1.3060s.

Canadian Dollar Price Chart – USD/CAD 120min

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

Notes: A closer look at Loonie price action shows USD/CAD trading within the confines of a descending pitchfork formation extending off the late-June high. A break below the median-line risks a test of the lower parallel – which currently converges on the 1.32 confluence support zone. Initial resistance back at 1.3323 with near-term bearish invalidation now lowered to the August open at the 1.34-handle.

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Bottom line: The USD/CAD sell-off is now approaching long-term uptrend support and while the immediate threat is lower, the decline may be vulnerable heading into this key region. From a trading standpoint, look to reduce short-exposure / lower protective stops on a test of the 1.32-handle – rebounds should be capped by the monthly open IF price is heading lower on this stretch with a close below trendline support needed to mark resumption of the March downtrend. 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 Positioning - US Dollar vs Canadian Dollar Technical Forecast
  • A summary of IG Client Sentiment shows traders are net-long USD/CAD - the ratio stands at +1.46 (59.39% of traders are long) – weak bearish reading
  • Long positions are13.65% lower than yesterday and 17.95% lower from last week
  • Short positions are 3.12% lower than yesterday and 8.60% lower 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.
USD/CAD MIXED
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily -5% -13% -9%
Weekly -35% 13% -20%
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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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