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Canadian Dollar Outlook: USD/CAD May Plunge-  Loonie Breakout Levels

Canadian Dollar Outlook: USD/CAD May Plunge- Loonie Breakout Levels

Michael Boutros, Strategist

Canadian Dollar Technical Price Outlook: Near-term Trade Levels

  • Canadian Dollar updated technical trade levels – Daily & Intraday Charts
  • USD/CAD plummets to fresh multi-year lows / bears eye first major support hurdle
  • Key near-term support into 1.2056 – resistance / near-term bearish invalidation 1.2247

The Canadian Dollar has rallied more than 1.6% against the US Dollar since the start of the month with a breakdown in USD/CAD taking price to fresh multi-year lows. While the broader focus remains weighted to the downside, the decline is approaching initial support targets of interest and we’re looking for a reaction just lower 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 Trade Outlook - Technical Forecast

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 had, “broken below confluence support / the monthly opening-range lows and keeps the focus lower heading into the close of the monthrecoveries should be limited to 1.2485 IF price is indeed heading lower with a close below 1.2358 needed to keep the immediate short-bias viable.” Indeed price did close April trade below this level and even tested it as resistance into the May open.

Price is now poised for a fourth consecutive daily decline with the first major support objective seen just lower at 1.2056/61- a region defined by the 50% Fibonacci retracement of the 2011 rally and the 2017 swing low. We’re looking for possible inflection into this threshold with a break / close below needed to keep the immediate short-bias intact towards subsequent support objectives at the 1.20-handle and the May 2015 low at 1.1920.

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 continuing to trade within the confines of a tight descending channel formation extending off the late-April high with the weekly opening-range taking shape just above confluence support. Initial resistance stands at the 2017 low-day close at 1.2156 with broader bearish invalidation now lowered to the 2018 low at 1.2247- a breach / close above would be needed to suggest a more significant low is in place.

Bottom line: The USD/CAD breakdown is approaching initial support objectives just lower early in the month and the bears may be vulnerable near-term. From a trading standpoint, look to reduce short-exposure / lower protective stops on a test of the 1.2056/60 support zone – rallies should be capped by 1.2156 IF price is indeed heading lower with a downside break risking a drop towards 1.1920. 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 +4.16 (80.63% of traders are long) – typically bearish reading
  • Long positions are4.35% higher than yesterday and 2.98% lower from last week
  • Short positions are 18.22% higher than yesterday and 6.64% 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. The recent changes in sentiment warn that the current USD/CAD price trend may soon reverse higher despite the fact traders remain net-long.


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.