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Canadian Dollar Forecast: USD/CAD Rebound to Face FOMC- Loonie Levels

Canadian Dollar Forecast: USD/CAD Rebound to Face FOMC- Loonie Levels

Michael Boutros, Strategist

Canadian Dollar Technical Price Outlook: USD/CAD Weekly Trade Levels

  • Canadian Dollar updated technical trade levels - Weekly Chart
  • USD/CAD rebound off technical support now eying downtrend resistance- FOMC on tap
  • Key support 1.2048- Resistance 1.2247, bearish invalidation 1.2365

The Canadian Dollar has been on the defensive against the US Dollar for the past two-weeks after rebounding off key technical support. The USD/CAD recovery is now approaching initial resistance targets with major event risk on tap this week. These are the updated targets and invalidation levels that matter on the USD/CAD weekly technical price charts heading into the FOMC rate decision. Review my latest Strategy Webinar for an in-depth breakdown of this Loonie technical setup and more.

Canadian Dollar Price Chart – USD/CAD Weekly

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

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

Notes: In last month’s Canadian Dollar Weekly Price Outlook we noted that, “The USD/CAD breakdown has stalled into lateral technical support at 1.2048/61 and the focus is on a reaction off this mark. From a trading standpoint, a good zone to reduce short-exposure / lower protective stops.” Loonie spent five-weeks testing this critical region before rebounding with a near-term breakout fueling a larger correction as weekly RSI attempts to climb back from oversold conditions. The immediate focus is on this recovery as price approaches broader downtrend resistance.

Initial weekly resistance stands at the 2018 swing low at 1.2247 with bearish invalidation now lowered to the March low / channel resistance at ~1.2365- a breach / weekly close above would be needed to suggest a more significant low is in place with such a scenario exposing the 2018 yearly open / 23.6% Fibonacci retracement of the 2020 decline at 1.2579-1.2635. Key support steady at the 2017 swing low / 50% retracement at 1.2048/61 with a break below needed to mark resumption of the broader downtrend towards the 2007 high / May 2015 low at 1.1876-1.1920.

Bottom line: The USD/CAD rebound off downtrend support is vulnerable heading into major event risk this week with the FOMC interest rate decision and Canada Core Inflation on tap. From at trading standpoint, be on the lookout for a reaction on stretch towards the upper parallel – losses should be limited to the monthly open at 1.2058 IF price is indeed heading higher with a breach above 1.2365 ultimately needed to suggest a larger trend reversal is underway. Keep in mind, critical support rests just lower and converges on multiple slopes near 1.1876- a break / close below would likely fuel the next bout of accelerated losses for the greenback. Review my latest Canadian Dollar Price Outlookfor a closer look at the near-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 Outlook
  • A summary of IG Client Sentiment shows traders are net-long USD/CAD - the ratio stands at +2.97 (74.79% of traders are long) – typically bearish reading
  • Long positions are6.88% higher than yesterday and 2.56% lower from last week
  • Short positions are 2.54% lower than yesterday and 19.43% 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. Traders are more net-long than yesterday but less 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.


US / Canada Economic Calendar

US / Canada Economic Calendar - USD/CAD Event Risk - FOMC Interest Rate Decision - Core Inflation

Economic Calendar - latest economic developments and upcoming event risk.

Active Weekly Technical Charts

--- Written by Michael Boutros, Technical 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.