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Canadian Dollar Outlook: USD/CAD Coils– Loonie Breakout Imminent

Canadian Dollar Outlook: USD/CAD Coils– Loonie Breakout Imminent

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 stalls at Fibonacci support- weekly opening-range in focus
  • Bears vulnerable while above 1.3151 – key resistance 1.34

The Canadian Dollar has been rangebound against the US Dollar for weeks with USD/CAD holding just above long-term Fibonacci support. While the broader outlook remains weighted to the downside, the immediate decline remains vulnerable while above this threshold and we’re looking for a breakout in the days ahead for further guidance. These are the updated targets and invalidation levels that matter on the USD/CAD price charts heading into the close of the month. 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 the USD/CAD sell-off was approaching key support, “with a break below 1.3152 needed to mark resumption of the broader March downtrend.” Loonie has continued to respect Fibonacci support here for the past five-days with price marking an outside-day reversal off the lows into the start of the week.

The immediate focus is on a breakout of this near-term range just above the 88.6% retracement with channel resistance now converging on the lower parallel of a longer-term ascending pitchfork we’ve been tracking off the 2016 / 2017 lows (~1.3240s).

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 with the weekly opening-range taking shape just below the upper parallel. A topside breach exposes resistance objectives at 1.3270 and the June low / 78.3% retracement at 1.3315/22. Ultimately a break / close above monthly-open resistance at the 1.34-handle is needed to suggest a larger price reversal is underway. Weekly-open support at 1.3170 with a close below 1.3151 marking resumption towards 1.3102 and the 61.8% retracement of the 2017 rally at 1.3057.

Bottom line: The USD/CAD has set a well-defined range just above support – look to the breakout for guidance. From a trading standpoint, a good zone to reduce short-exposure / lower protective stops – be on guard for downside exhaustion while above 1.3151 with a breakout of this multi-week formation needed to fuel a larger correction. Ultimately a recovery here may offer more favorable opportunities closer to downtrend resistance. 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 +1.93 (65.83% of traders are long) – weak bearish reading
  • Long positions are1.63% lower than yesterday and 18.35% lower from last week
  • Short positions are 6.55% lower than yesterday and 5.72% 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 more net-long than yesterday but less net-long from last week and the combination of current positioning and recent changes gives us a further mixed USD/CAD trading bias from a sentiment standpoint.

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Key US / Canada Data Releases

US / Canada Key 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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