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Canadian Dollar Outlook: USD/CAD at Support- Loonie Breakout Imminent

Canadian Dollar Outlook: USD/CAD at Support- Loonie Breakout Imminent

Michael Boutros, Strategist

Canadian Dollar Technical Price Outlook: Near-term Trade Levels

  • Canadian Dollar updated technical trade levels – Daily & Intraday Charts
  • USD/CAD bears stall at major support hurdle- Loonie contraction persists
  • Breakout of near-term consolidation imminent – support at 1.20, resistance / near-term bearish invalidation 1.2144
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The Canadian Dollar is in an epic battle against the US Dollar with USD/CAD consolidating around a critical technical support confluence for the past two-weeks. While the broader outlook remains tilted to the downside, the immediate decline may yet be vulnerable here and we‘re on breakout watch heading into the close of the week with key US / Canada employment data on tap Friday. 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 - USDCAD 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, “is in consolidation just above confluence support. From at trading standpoint, look to reduce short-exposure / lower protective stops on another test of key support at 1.2048/61- the focus remains on a breakout for guidance with the broader decline at risk awhile above these lows.” Multiple attempts to break lower over the past week have failed with price continuing to contract around this key support zone.

Initial daily resistance stands with the March 2020 trendline / weekly swing highs at 1.2143; a topside breach / close above is needed to suggest a larger recovery is underway towards the 2018 swing low at 1.2247- look for a larger reaction there IF reached for guidance. A downside break of this consolidation would likely fuel another bout of accelerated losses for the greenback with such a scenario exposing subsequent support objectives at the May 2015 low at 1.1919 and the lower parallels near the 1.18-handle.

Canadian Dollar Price Chart – USD/CAD 240min

Canadian Dollar Price Chart - USD/CAD 240min - Loonie Trade Outlook - USDCAD Technical Forecast

Notes: A closer look at Loonie price action shows USD/CAD continuing to contract around confluence support at 1.2048/61 – a region defined by the 50% Fibonacci retracement of the 2011 ascent and the 2017 low. A break / close below this formation at the 1.20-handle is needed to fuel the next leg lower. A topside breach exposes 1.2203 and 1.2247/54.

Bottom line: USD/CAD remains in consolidation just above confluence support. From at trading standpoint, be on the lookout for an early-month breakout for guidance with a close below 1.20 needed mark resumption of the broader Canadian Dollar rally. Keep in mind we get the release of US Non-Farm Payroll (NFP) and Canada employment on Friday morning – expect volatility & stay nimble into the releases. 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 - USDCAD Retail Positioning
  • A summary of IG Client Sentiment shows traders are net-long USD/CAD - the ratio stands at +4.14 (80.54% of traders are long) – typically bearish reading
  • Long positions are4.87% lower than yesterday and 2.16% higher from last week
  • Short positions are 9.94% higher than yesterday and 6.84% 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

Key US / Canada Data Releases - USD/CAD Economic Calendar - Loonie Weekly Event Risk- NFP, Canada Employment on Tap

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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