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Canadian Dollar Outlook: USD/CAD BoC Breakdown– Loonie Levels

Canadian Dollar Outlook: USD/CAD BoC Breakdown– Loonie Levels

Michael Boutros, Strategist

Canadian Dollar Technical Price Outlook: Near-term Trade Levels

  • Canadian Dollar updated technical trade levels – Daily & Intraday Charts
  • USD/CAD carves monthly opening-range above key lateral support
  • Key resistance at 1.2782– Break / close below 1.2579 needed to mark trend resumption
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The Canadian Dollar is up more than 1% against the US Dollar since the start of the week with USD/CAD pressing the lower bounds of a multi-week range in price. While the broader downtrend remains intact, the immediate decline may be vulnerable here near-term as Loonie tests major technical support. 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 the USD/CAD recovery was approaching down trend resistance with a, “close below 1.2782 would be needed to threaten another run at the lows.” A breakdown into the close of the year fueled a decline into a key support zone we’ve been tracking for months now at 1.2579-1.2647- a region defined by the 2018 objective yearly open and the 78.6% Fibonacci retracement of the 2017 advance. Note that the January opening-range lows also converge on this threshold – we’re looking for inflection in the days ahead for guidance here.

A break / close below is needed to mark resumption of the broader down trend towards the 25% parallel near the 1.25-handle and 1.2450. Critical long-term support rests lower at the 2018 low-day close / lower parallels at 1.2312. Resistance / bearish invalidation now lowered to the October 2018 low at 1.2782 – a breach / close above this pitchfork would be needed to suggest a more significant reversal is underway.

Canadian Dollar Price Chart – USD/CAD 240min

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

Notes: A closer look at Loonie price action shows USD/CAD testing the median-line today with a multi-week range taking shape just above this near-term support zone. Look for topside exhaustion ahead of weekly open resistance at 1.2727 IF price is indeed heading lower with a break likely to fuel accelerated losses towards the lower parallels.

Bottom line: The Canadian Dollar has carved out a well-defined monthly opening-range just above major lateral support. From a trading standpoint, a good zone to reduce short-exposure / lower protective stops – look for inflection here with a close below needed to keep the immediate decline viable. 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 +1.85 (64.90% of traders are long) – typically bearish reading
  • Long positions are2.89% higher than yesterday and 2.22% higher from last week
  • Short positions are 6.81% lower than yesterday and 16.48% 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 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

Key US / Canada Data Releases - 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.

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