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Canadian Dollar Outlook: USD/CAD Rally Rips to Resistance / 2020 Open

Canadian Dollar Outlook: USD/CAD Rally Rips to Resistance / 2020 Open

Michael Boutros, Strategist

Canadian Dollar Technical Price Outlook: Near-term Trade Levels

  • Canadian Dollar updated technical trade levels – Daily & Intraday Charts
  • USD/CAD rebounds off multi-month downtrend support– recovery eyes yearly open resistance
  • Key near-term resistance at 1.2994 – Weekly-open support 1.2782

The Canadian Dollar is off more than 1% against the US Dollar since the start of the week with USD/CAD mounting the first major counter-offensive off technical support. The recovery keeps price within the broader downtrend and we’re looking for a more significant inflection in price on a stretch higher into yearly open resistance. These are the updated targets and invalidation levels that matter on the USD/CAD price charts heading into the close of the year. Review my latest Strategy Webinarfor an in-depth breakdown of this Loonie technical setup and more.

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 noted that, “we’re looking for a possible near-term low in price closer to downtrend support,” as USD/CAD plummeted into the December open. A test of the lower parallel on building momentum divergence held the lows days later with breach back above the October 2018 low at 1.2782 fueling a larger recovery in the US Dollar.

The breach of the median-line of the descending pitchforkformation extending off the September / October highs keeps the focus on confluence resistance at the upper parallel / 2020 yearly open / December open at 1.2975/94- a breach / close above this threshold is needed to suggest a more significant low is in place with such a scenario exposing the 61.8% Fibonacci retracement at 1.3057 and longer-term channel resistance at the November swing high near 1.3172.

Canadian Dollar Price Chart – USD/CAD 240min

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

Notes: A closer look at Loonie price action shows USD/CAD breaking / testing the median-line as support with the advance now approaching confluence resistance at 1.2975/94 – be on the lookout for inflection off this zone. Initial support now back at 1.2884 backed by 1.2783/96- a break below this threshold would suggest resumption of the broader downtrend towards the yearly low-day close at 1.2695 and the 78.9% retracement at 1.2619.

Bottom line: USD/CAD has rebounded off downtrend support with the recovery now approaching multi-month downtrend resistance. From a trading standpoint, look to reduce long-exposure / raise protective stops on a stretch into yearly / monthly open resistance at 1.2975/94- be on the lookout for inflection there for guidance IF reached with a breach / close above needed to suggest a larger Loonie price reversal is underway. Ultimately a close below 1.2782 would be needed to threaten another run at the lows. 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 - US Dollar vs Canadian Dollar Trade Outlook - Loonie Technical Forecast
  • A summary of IG Client Sentiment shows traders are net-long USD/CAD - the ratio stands at +2.29 (69.63% of traders are long) – typically bearish reading
  • Long positions are13.89% higher than yesterday and 23.83% lower from last week
  • Short positions are 4.40% lower than yesterday and 20.63% 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 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.


Key US / Canada Data Releases

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

Economic Calendar - latest economic developments and upcoming event risk.

Active Technical 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.