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Canadian Dollar Outlook: USD/CAD Rally Thwarted by Trend Resistance

Canadian Dollar Outlook: USD/CAD Rally Thwarted by Trend Resistance

Michael Boutros, Strategist

Canadian Dollar Technical Price Outlook: Near-term Trade Levels

  • Canadian Dollar updated technical trade levels – Daily & Intraday Charts
  • USD/CAD turns from multi-month trend resistance / threatens January breakout
  • Key support / bullish invalidation into the 1.27-handle– Breach / close above exposes 1.2975

The Canadian Dollar is virtually unchanged against the US Dollar into the start of the week with USD/CAD continuing to grind just below multi-month trend resistance. While a deeper setback may yet be on the cards, the focus is on a support just lower as the bulls look to validate the January breakout. 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 Trade Outlook - 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 USD/CAD was ranging, “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.” The Mach trendline has continues to cap the topside with USD/CAD breaking below monthly open support on Friday.

The broader focus remains unchanged with the break below the 25% parallel threatening a deeper setback here towards pitchfork support. Daily support rests with the 2020 swing low / 61.8% Fibonacci retracement at 1.2688-1.27 with a break / close below the lower parallel needed to shift the focus back towards key support at 1.2579-1.2619. Ultimately a breach / close above the February opening-range highs would be needed to suggest a larger reversal is underway with such a scenario exposing subsequent resistance objectives at 1.2928 at 1.2975/94.

Canadian Dollar Price Chart – USD/CAD 120min

Canadian Dollar Price Chart - USD/CAD 120min - Loonie Trade Outlook - 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 December / January lows with Loonie now probing the monthly lows. Initial support at the 100% extension at 1.2726 backed by 1.2688-1.27- look for downside exhaustion into this zone IF price is indeed heading higher. Monthly open resistance stands at 1.2785 with a breach above the trendline exposing 1.2874 and the median-line / November lows at 1.2928.

Bottom line: The Canadian Dollar threatening a larger run here and the focus is on possible exhaustion just lower in USD/CAD. From a trading standpoint, still looking for a low into 1.27 for guidance with a breach above the March trendline needed to mark resumption of the broader January advance. Ultimately, a close below 1.2579 would put the bears back into control. 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 Trader Sentiment - Technical Forecast
  • A summary of IG Client Sentiment shows traders are net-long USD/CAD - the ratio stands at +2.00 (66.61% of traders are long) – typically bearish reading
  • Long positions are14.48% higher than yesterday and 0.49% higher from last week
  • Short positions are 31.63% higher than yesterday and 0.73% 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 and compared with last week. Recent changes in sentiment warn that the current USD/CAD price trend may soon reverse higher despite the fact traders remain net-long.

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Key US / Canada Data Releases

Key US / Canada Data Releases - USD/CAD Economic Calendar

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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