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Canadian Dollar Outlook: USD/CAD Battle Lines Drawn- July Loonie Levels

Canadian Dollar Outlook: USD/CAD Battle Lines Drawn- July Loonie Levels

Michael Boutros, Strategist

Canadian Dollar Technical Price Outlook: Near-term Trade Levels

  • Canadian Dollar updated technical trade levels – Daily & Intraday Charts
  • USD/CAD rebounds off uptrend support- Loonie vulnerable into July open / NFPs
  • Resistance 1.2365, 1.2485 (key) - Support 1.2288, bullish invalidation 1.2190
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The Canadian Dollar is on defense against the US Dollar into the weekly open with USD/CAD rebounding off near-term uptrend support. While the broader outlook remains tilted to the downside, the near-term technicals remain constructive off the yearly lows with the battle-lines drawn into the July open / Non-Farm Payrolls. 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.

Canadian Dollar Price Chart – USD/CAD Daily

Canadian Dollar Price Chart - USD/CAD Daily - Loonie Trade Outlook - NFP 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 remains in consolidation just above confluence support. From at trading standpoint, be on the lookout for an early-month breakout for guidance…” A breakout of the June opening-range on the 11th fueled an accelerated rally of more than 3.9% off the monthly low before reversing sharply off confluent trendline resistance around the March low-day close at 1.2485. Loonie corrected more than 1.8% off the highs last week with the 25% parallel offering support over the past few days.

Initial daily resistance stands with the March swing low at 1.2365 backed by the 100-day moving average near ~1.2396. Ultimately, a breach / close above the 1.2485 is needed to fuel the next leg higher towards the 2018 yearly open / January lows at 1.2580/88.

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 respect the ascending pitchfork formation we’ve been tracking off the yearly lows with the weekly opening-range taking shape just above 25% parallel. Weekly open support at 1.2288 backed by 1.2246 with broader bullish invalidation set to 61.8% Fibonacci retracement mid-May swing high at 1.2190-1.2203- a break / close this threshold would be needed to mark resumption of the 2020 downtrend (area of interest for possible downside exhaustion IF reached).

Bottom line: USD/CAD is rebounding off parallel uptrend support- keep an eye-out for a reaction at the median-line for guidance. From at trading standpoint, look to reduce long-positions / raise protective stops on a test of 1.2365- losses should be capped by the weekly open IF price is heading higher with a breach / close above the median-line needed to fuel another run at the highs near 1.2485. Keep in mind we’re heading into the close of the month / quarter with NFPs on tap into the extended holiday break- stay nimble. 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 Outlook
  • A summary of IG Client Sentiment shows traders are net-long USD/CAD - the ratio stands at +2.87 (74.14% of traders are long) – typically bearish reading
  • Long positions are3.12% higher than yesterday and 29.64% higher from last week
  • Short positions are 5.09% higher than yesterday and 20.33% 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 Outlook

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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