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Canadian Dollar Outlook: Loonie Levels for Looming USD/CAD Breakout

Canadian Dollar Outlook: Loonie Levels for Looming USD/CAD Breakout

Michael Boutros, Strategist

Canadian Dollar Technical Price Outlook: Near-term Trade Levels

  • Canadian Dollar updated technical trade levels – Daily & Intraday Charts
  • USD/CAD carves weekly opening-range just below multi-month trend resistance
  • Key support / bullish invalidation at 1.27– Breach / close above exposes 1.2975

The Canadian Dollar is down more than 0.35% against the US Dollar since the start of the week with USD/CAD testing long-term slope resistance into the February open. Loonie is carving the weekly opening-range just below and we’re looking for a breakout in the days ahead for guidance. 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.

Canadian Dollar Price Chart – USD/CAD Daily

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

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

Technical Outlook: In last month’s Canadian Dollar Price Outlook we noted that USD/CAD, “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…” Level in focus was 1.2579-1.2619 – a region defined by the 2018 objective yearly open and the 78.6% retracement of the 2017 advance. Loonie tested this threshold in late January before rebounding sharply with the subsequent rally taking out multi-month downtrend resistance last week.

The advance is now testing basic trendline resistance extending off the March 2020 highs – this slope has capped the rally for the past four sessions and a breach / close above is needed to fuel the next leg higher in USD/CAD. Daily support rests with 61.8% Fibonacci retracement / yearly open at 1.2700/13 – losses should be capped by this zone IF price is indeed heading higher.

Canadian Dollar Price Chart – USD/CAD 120min

Canadian Dollar Price Chart - USD/CAD 120min - Loonie Trade Outlook - USDCAD Technical Forecast

Notes: A closer look at Loonie price action shows USD/CAD trading within the confines of an ascending pitchfork formation extending off the January lows with the weekly opening-range taking shape just below the March trendline. Weekly open support rests at 1.2782 backed by 1.2735 & the 1.27-handle- both zone of interest for possible downside exhaustion. A topside breach keeps the focus on the November lows at 1.2928 backed by the 2020 yearly open / the September lows at 1.2975/94- look for a larger reaction there IF reached.

Bottom line: The Canadian Dollar has carved a weekly opening-range just below long-term downtrend resistance and we’re looking for inflection here. From at trading standpoint, look for downside exhaustion ahead of 1.27 with a breach / close above 1.2975/94 needed to suggest a more significant low is in place. 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 +1.75 (63.70% of traders are long) – typically bearish reading
  • Long positions are4.26% lower than yesterday and 0.52% lower from last week
  • Short positions are 14.74% higher than yesterday and 19.56% 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 less net-long than yesterday but more 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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Key US / Canada Data Releases

US / Canada Economic Calendar - USD/CAD Data Releases - Key Event Risk Ahead

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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