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Canadian Dollar Forecast: USD/CAD Sell-off Faces Downtrend Support

Canadian Dollar Forecast: USD/CAD Sell-off Faces Downtrend Support

Michael Boutros, Strategist

Canadian Dollar Technical Price Outlook: USD/CAD Weekly Trade Levels

  • Canadian Dollarupdated technical trade levels - Weekly Chart
  • USD/CAD plummets to multi-year lows – initial support in view
  • Critical support 1.2579-1.2619 - bearish invalidation lowered to 1.3056
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The Canadian Dollar fractionally stronger against the US Dollar into the start of the week with USD/CAD attempting to mark fifth consecutive weekly decline. The Loonie trend has matured and while the broader risk remains titled to the downside, the decline may be vulnerable near-term as price approaches broader downtrend support. These are the updated targets and invalidation levels that matter on the USD/CAD weekly technical price chart heading into the close of the year. Review my latest Strategy Webinar for an in-depth breakdown of this Loonie technical setup and more.

Canadian Dollar Price Chart – USD/CAD Weekly

Canadian Dollar Price Chart - USD/CAD Weekly - Loonie Trade Outlook - USDCAD Technical Forecast

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

Notes: In my last Canadian Dollar Weekly Price Outlook we noted that a multi-week sell-off in USD/CAD had taken price into the yearly range lows and to, “be on the lookout for inflection here early in the month.” A break below yearly-open support at 1.2975 into the December open fueled a sell-off of more than 2.3% with the decline now testing support at the 2017 December high-week reversal close at 1.2725 / lower parallel.

A break / close below this threshold is needed to keep the immediate short-bias viable heading into next week with such a scenario exposing confluence support at the 2018 yearly open / 78.6% Fibonacci retracement of 2017 advance at 1.2579-1.2619 – look for a larger reaction there IF reached. Initial resistance stands with the median-line (currently ~1.2830s) backed by 1.2975 with bearish invalidation now lowered to the 61.8% retracement at 1.3057.

Bottom line: The USD/CAD breakdown has marked four consecutive weekly declines with the sell-off now testing the first major downtrend support zone. From a trading standpoint, a good zone to reduce short exposure / lower protective stops – be on the lookout for topside exhaustion ahead of the yearly open on recoveries IF price is indeed heading lower. Ultimately a leg lower would have us looking for a larger reaction closer to more significant downtrend support near the 1.26-handle. Review my latest Canadian Dollar Price Outlook for a closer look at the near-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 - Technical Outlook
  • A summary of IG Client Sentiment shows traders are net-long USD/CAD - the ratio stands at +2.58 (72.04% of traders are long) – typically bearish reading
  • Long positions are 4.59% lower than yesterday and 9.16% lower from last week
  • Short positions are14.03% lower than yesterday and 0.60% 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. Traders are more net-long than yesterday but less net-long from last week. 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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US / Canada Economic Calendar

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

Economic Calendar - latest economic developments and upcoming event risk.

Previous Weekly Technical Charts

--- Written by Michael Boutros, Technical 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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