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Canadian Dollar Outlook: USD/CAD Exhaustion at Technical Resistance

Canadian Dollar Outlook: USD/CAD Exhaustion at Technical Resistance

Michael Boutros, Strategist

Canadian Dollar Technical Price Outlook: Near-term Trade Levels

  • Canadian Dollar updated technical trade levels – Daily & Intraday Charts
  • USD/CAD rally signals exhaustion into uptrend resistance- risk for correction
  • Resistance 1.2713/32 - Support ~1.25, bullish invalidation 1.2365
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The Canadian Dollar is poised to snap a three week losing streak against the US Dollar after USD/CAD reversed sharply off technical resistance early in the week. While the losses may trim into the close, the risk remains for a larger correction on the heels of the recent turn and deeper pullback may ultimately offer more favorable opportunities closer to trend support. These are the updated targets and invalidation levels that matter on the USD/CAD price charts into the close of the week. 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 - Technical Forecast

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

Technical Outlook: In my last Canadian Dollar Price Outlook we noted a constructive bias in USD/CAD while above the monthly open with resistance objectives eyed, “at the April high at 1.2654 and the 2021 yearly open / 100% Fibonacci extension at 1.2713/32 (key)- an area of interest for possible topside exhaustion IF reached.” USD/CAD briefly registered an intraday high at 1.2807 into the start of the week before reversing off pitchfork resistance with the pullback now back at the median-line.

Canadian Dollar Price Chart – USD/CAD 240min

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

Notes: A closer look at Loonie price action shows USD/CAD turning from the upper parallel to test median-line support today. Weekly-open resistance at 1.2602 with a breach / close above 1.2713/32 still needed to mark resumption towards 1.2785 and objective 2021 yearly high at 1.2881. A break below the median-line would expose a larger correction towards the June high / 38.2% retracement at 1.2487 backed closely by 1.2424 and the March low at 1.2365- both support zones of interest for possible downside exhaustion IF reached. Ultimately a close below the 61.8% retracement at 1.2312 would be needed to validate resumption of the broader 2020 decline.

Bottom line: The USD/CAD reversal off uptrend support is now testing the median-line of the May advance. From a trading standpoint, look possible topside exhaustion ahead of the yearly open IF price is still heading lower to complete a larger correction- ultimately, a deeper pullback May offer more favorable opportunities closer to uptrend support with a breach of the highs exposing the 2021 extremes near ~1.29. 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 +1.72 (63.3% of traders are long) – typically bearish reading
  • Long positions are22.46% higher than yesterday and 1.68% higher from last week
  • Short positions are 24.27% lower than yesterday and 10.58% 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 further net-long than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger USD/CAD-bearish contrarian trading bias from a sentiment standpoint.

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US / Canada Economic Calendar

US / Canada Economic Calendar - USD/CAD Event Risk - Key Loonie Data Releases

Economic Calendar - latest economic developments and upcoming event risk.

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- 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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