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Canadian Dollar Outlook: Loonie at the Lows- USD/CAD Breakout Pending

Canadian Dollar Outlook: Loonie at the Lows- USD/CAD Breakout Pending

Michael Boutros, Strategist

Canadian Dollar Technical Price Outlook: Near-term Trade Levels

  • Canadian Dollar updated technical trade levels – Daily & Intraday Charts
  • USD/CAD plunges to multi-yearly lows / lateral support– weekly opening-range in focus
  • Downside break exposes 1.27– bearish invalidation lowered to 1.2884
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The Canadian Dollar has surged more than 4.6% against the US Dollar since the October highs in USD/CAD with price now probing lateral support at multi-year lows. While the recent breakdown does leave the broader risk weighted to the downside, the immediate decline may be vulnerable here as price approaches downtrend support. These are the updated targets and invalidation levels that matter on the USD/CAD price charts. Review my latest Strategy Webinarfor an in-depth breakdown of this Loonie technical 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 last month’s Canadian Dollar Price Outlook we noted that the USD/CAD sell-off was approaching, “key support at the objective yearly open – looking for a reaction down here.” The focus was on a close below 1.2975 to validate a larger break and we got it into the December open. A close below this threshold on the first of the month fueled a decline of more than 1.7% with price now testing lateral support a the October 2018 low at 1.2782- the weekly opening-range is taking shape just above and we’re looking to the break for guidance.

USD/CAD continues to trade within the confines of a descending pitchforkextending off the September / October with daily resistance eyed at the median-line / 1.2887 backed by the 2020 yearly open at 1.2975. Broader bearish invalidation now lowered to 1.3056. A break lower from here keeps the focus on the lower parallel (currently near the 1.27-handle) and the 78.6% Fibonacci retracement at 1.2619.

Canadian Dollar Price Chart – USD/CAD 240min

Canadian Dollar Price Chart - USD/CAD 240min - Loonie Trade Outlook - Technical Forecast

Notes: A closer look at Loonie price action shows USD/CAD trading in a tight weekly range just above lateral support with momentum divergence into the lows threatening a near-term recovery here. The threat remains lower while below the median line with a break lower exposing subsequent support objectives at the lower parallel backed by 1.2663 and 1.2619.

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Bottom line: The USD/CAD breakdown has stalled at lateral support and the immediate focus is on a break of the weekly opening-range for guidance. From a trading standpoint, a good zone to reduce short-exposure / lower protective stop – be on the lookout for topside exhaustion ahead of 1.2884 IF price is heading lower on this stretch. Ultimately, we’re looking for a possible near-term low in price closer to downtrend 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 Outlook - Technical Forecast
  • A summary of IG Client Sentiment shows traders are net-long USD/CAD - the ratio stands at +2.82 (73.82% of traders are long) – typically bearish reading
  • Long positions are0.11% lower than yesterday and 7.31% higher from last week
  • Short positions are 5.05% higher than yesterday and 0.30% 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 but more 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.
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 - Key Loonie Event Risk

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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