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Canadian Dollar Outlook: USD/CAD Plunge Searches Support- Loonie Levels

Canadian Dollar Outlook: USD/CAD Plunge Searches Support- 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 plummets off fresh 2021 yearly highs / uptrend resistance – correction risk
  • Resistance 1.2713, 1.2822- bearish invalidation - Support 1.2590, 1.2469- 1.2366 critical
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The Canadian Dollar surged more than 1.5% against the greenback this week with USD/CAD reversing sharply off uptrend resistance. While the broader outlook is still constructive, the risk for a larger correction remains while below the yearly high-day close. These are the updated targets and invalidation levels that matter on the USD/CAD price charts this week.

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 that, “A rebound off confluence support has USD/CAD eyeing near-term downtrend resistance just higher.” Loonie held within the August opening-range into the 17th with a topside breach exposing a rally of nearly 3% into fresh yearly highs. The rally reversed sharply off pitchfork resistance last week with USD/CAD paring more than 38.2% of the 2021 yearly range in just three days. Is a more significant exhaustion high in place?

Initial support rests at 1.2590 backed by the sliding parallel extending off the late-June low (red) around the 1.25-handle and the objective monthly open at 1.2469. Broader bullish invalidation is now raised to the March low / the 61.8% Fibonacci retracement / 100-day moving average at 1.2365/73- weakness beyond this threshold would suggest a larger / more significant trend reversal may be underway.

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 severity of the recent collapse off the yearly high / slope resistance with USD/CAD settling today just above Fibonacci support. Initial resistance now stands back at the yearly open / 38.2% retracement at 1.2713/20 backed by the median-line (~1.2760s) and the 1.28-handle. Ultimately, a breach / close above the weekly open / high-day close at 1.2818/23 is needed to mark resumption of the broader uptrend towards the January highs at 1.2881 and beyond.

Bottom line: USD/CAD reversed off uptrend resistance last week with the pullback now approaching uptrend support- looking for a reaction on a stretch lower towards the lower parallels. From a trading standpoint, be on the lookout for topside exhaustion ahead of the 1.28-handle on recoveries IF price is indeed heading lower with a larger correction likely to offer more favorable entries closer to uptrend support. 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 +2.61 (72.32% of traders are long) – typically bearish reading
  • Long positions are36.48% higher than yesterday and 32.65% higher from last week
  • Short positions are 16.21% lower than yesterday and 28.42% 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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Key US / Canada Data Releases

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

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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