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Canadian Dollar Outlook: USD/CAD Threatens Major Breakdown

Canadian Dollar Outlook: USD/CAD Threatens Major Breakdown

Michael Boutros, Strategist

Canadian Dollar Technical Price Outlook: Near-term Trade Levels

  • Canadian Dollar updated technical trade levels – Daily & Intraday Charts
  • USD/CAD testing critical support range- looking for inflection
  • Key support into 1.2579 – broader risk remains lower sub-1.27

The Canadian Dollar is attempting a third consecutive daily advance against the US Dollar with USD/CAD continuing to grind into a critical support zone. We’re looking for a reaction down here with a below needed to keep the immediate decline viable into the close of the month. These are the updated targets and invalidation levels that matter on the USD/CAD price charts. Review my latest Strategy Webinar for an in-depth breakdown of this Loonie technical setup and more.

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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 highlighted that the USD/CAD recovery had faltered into the March trendline with the yearly opening-range preserved just above a key support confluence. We noted that, “Ultimately, a close below 1.2579 would put the bears back into control.” Today’s low registered at 1.2580- pay attention here.

Daily resistance stands back the trendline / yearly open at 1.2713 – look for a reaction there IF reached with a breach / close above the February open at 1.2785 needed to suggest a larger reversal is underway. A break below this key support zone would risk accelerated losses for the greenback with such a scenario exposing 1.2450 and the 2018 low-day close at 1.2312.

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 a descending pitchfork formation extending off the January / February highs with the weekly opening-range taking shape just above longer-term support at 1.2579-1.2619. Initial resistance eyed at 1.2665 backed by the 38.2% Fibonacci retracement / 2021 yearly open at 1.2695-1.2713. A downside break from here would keep the focus on subsequent support objectives at the lower parallel / 1.2527 and beyond and 1.2450.

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Bottom line: The Canadian Dollar is challenging a major breakout here with USD/CAD now testing a critical pivot zone. From a trading standpoint, a good zone to reduce short-exposure / lower protective stops. Topside advances should be capped by the 1.27-handle IF price is indeed heading lower with a weekly close below 1.2579 needed to keep the short-bias viable in the days ahead. Keep in mind we are heading into the close of the month and as always, we’ll want to remain nimble as price test this key inflection zone. 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 Retail Positioning - Technical Forecast
  • A summary of IG Client Sentiment shows traders are net-long USD/CAD - the ratio stands at +2.99 (74.94% of traders are long) – typically bearish reading
  • Long positions are8.00% higher than yesterday and 9.12% higher from last week
  • Short positions are 58.00% higher than yesterday and 8.14% 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 less net-long than yesterday but more 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.
USD/CAD BULLISH
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of clients are net long. of clients are net short.
Change in Longs Shorts OI
Daily 2% 5% 3%
Weekly -9% 44% 6%
Learn how shifts in USD/CAD retail positioning impact trend
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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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