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Canadian Dollar Outlook: USD/CAD Recovery Vulnerable- Loonie Levels

Canadian Dollar Outlook: USD/CAD Recovery Vulnerable- 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 rebound off near-term downtrend support eyes resistance- exhaustion risk ahead
  • Resistance 1.2569, 1.2615- bearish invalidation 1.2660 - Weekly open support 1.2469, 1.2407 key
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The Canadian Dollar fell nearly 0.7% against the US Dollar since the start of the week / month with USD/CAD attempting to mark a fourth consecutive daily advance off key support. The recovery may be vulnerable in the days ahead however as the rally approaches near-term downtrend resistance – we’re looking for inflection just higher for guidance. These are the updated targets and invalidation levels that matter on the USD/CAD price charts this week with US Non-Farm Payrolls (NFP) and Canada employment on tap Friday. 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, “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.” Loonie straddled this slope for nearly a week before breaking lower with the decline rebounding off confluence support into the close of July at 1.2407/33- a region defined by the 50% retracement of the June advance and the 61.8% extension of the July decline. Price is poised to mark a fourth consecutive daily rally- is a low in place?

The immediate focus is on possible exhaustion on this recovery with daily resistance eyed back at the median-line around ~1.2615 and the 61.8% Fibonacci retracement of the July decline at 1.2660- Ultimately a breach / close above the objective 2021 yearly open at 1.2713 would be needed to mark resumption of the broader uptrend.

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 the USD/CAD recovery trading within a well-defined embedded ascending channel within the July downtrend with a rebound off support now targeting resistance just higher. Initial support now rests back at the 1.25-handle backed by the weekly open at 1.2469. A break / close below the critical 1.2407/33 pivot zone would risk another run towards subsequent support objectives at the March low at 1.2365 and the 61.8% retracement / 100% extension at 1.2312/25- an area of interest for possible exhaustion / entries IF reached.

Bottom line: A rebound off confluence support has USD/CAD eyeing near-term downtrend resistance just higher. From at trading standpoint, be on the lookout for possible topside exhaustion while below the median-line with a break of the lows risking another bout of accelerated losses for the Dollar. Stay nimble heading into the close of the week with US NFPs and Canada employment both slated for release on Friday and may offer a decent catalyst for price here. 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
  • A summary of IG Client Sentiment shows traders are net-long USD/CAD - the ratio stands at +1.85 (64.87% of traders are long) – typically bearish reading
  • Long positions are8.18% lower than yesterday and 11.15% lower from last week
  • Short positions are 4.52% higher than yesterday and 2.90% 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. Recent changes in sentiment warn that the current USD/CAD price trend may soon reverse higher despite the fact traders remain net-long.

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Key US / Canada Data Releases

Key US / Canada Data Releases - USD/CAD Key Data Releases - US NFP (Non-Farm Payroll) - Canada Employment

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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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