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Canadian Dollar Outlook: USD/CAD Five Weeks Down, Five Month Low

Canadian Dollar Outlook: USD/CAD Five Weeks Down, Five Month Low

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 approaching critical long-term uptrend support around ~1.32
  • Risk for losses while below 1.34 – break below 1.3151 needed to keep short-bias viable

The Canadian Dollar offensive is attempting a fifth consecutive week with Loonie up nearly 1% against the US Dollar. The move takes USD/CAD back towards a longer-term technical support just lower and the focus is on a reaction at this key slope. 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 noted that the USD/CAD sell-off was approaching near-term support and that, “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.” A mid-week rebound last week fueled a rally of more than 1.2% with USD/CAD failing precisely at the August open at 1.34 on Friday (high registered at 1.3399).

The pullback keeps Loonie within the confines of a descending channel formation extending off the July high. Daily support eyed at the lower parallel of a long-term weekly slope (blue) / February low at 1.3202 backed by the 88.6% Fibonacci resistance at 1.3152. The broader risk remains lower while below monthly open resistance at the 1.34-handle.

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 confines of a well-defined descending pitchfork formation extending off July highs. Initial resistance now 1.3315/22 backed by 1.3360 with a break below the median-line / 1.3270 needed to keep the focus on the lower parallels – look for a larger reaction there IF reached. A close below 1.3152 would suggest a larger trend reversal may be underway towards 1.31 and beyond.

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Bottom line: The USD/CADsell-off is on pace for a fifth week with price once again approaching key support just lower. From a trading standpoint, look to reduce short-exposure / lower protective stops on a test of 1.32 – rallies should be capped by 1.3360 IF price is indeed heading lower on this stretch with a break below 1.3152 needed to mark resumption of the broader 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 Trade Outlook - Technical Forecast
  • A summary of IG Client Sentiment shows traders are net-long USD/CAD - the ratio stands at +1.46 (59.41% of traders are long) – weak bearish reading
  • Long positions are12.96% higher than yesterday and 7.35% higher from last week
  • Short positions are 14.19% lower than yesterday and 7.26% 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 further net-long than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger USD/CAD-bearish contrarian 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 14% -7% 6%
Weekly 9% 8% 9%
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Key US / Canada Data Releases

Key US / Canada Data Releases - USD/CAD Economic Calendar - Weekly 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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