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Canadian Dollar Outlook: USD/CAD Breakout Brewing- FOMC, NFP on Tap

Canadian Dollar Outlook: USD/CAD Breakout Brewing- FOMC, NFP on Tap

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 key support threatens larger recovery
  • Resistance 1.2440 (key), 1.2493 - Support 1.2378, 1.2365 (key)
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The Canadian Dollar if off 0.36% against the US Dollar since the start of the week with USD/CAD attempting to breakout of the September downtrend ahead of major event risk. These are the updated targets and invalidation levels that matter on the USD/CAD price charts heading the FOMC tomorrow and key employment reports on Friday. 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 - USDCAD 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 the USD/CAD sell-off had, “responded to downtrend support and we’re on the lookout for possible price inflection here. From at trading standpoint, a good zone to reduce short-exposure / lower protective stops – rebounds should be capped by 1.2440 IF price is heading lower.” The support zone in focus was the 1.168% Fibonacci extension of the September decline at 1.2285 – price registered a low at 1.2288 before rallying with the advance registering a high at 1.2431 before pulling back. The stage has been set and we’re looking for the breakout the 1.2285-1.2440 range to offer guidance.

Canadian Dollar Price Chart – USD/CAD 120min

Canadian Dollar Price Chart - USD/CAD 120min - Loonie Trade Outlook - USDCAD Technical Forecast

Notes: A closer look at Loonie price action shows USD/CAD attempting to breach the September downtrend with a proposed ascending formation guiding this breakout. Weekly open support at 1.2379 with near-term bullish invalidation just lower at the March low near 1.2365- losses should be limited to this threshodl IF price is heading higher on this stretch. A topside breach keeps the focus subsequent resistance objectives at the September low at 1.2493 and the 100-day moving average around ~1.2528.

Bottom line: USD/CAD is threatening a breakout here into the November open - the immediate focus is on 1.2365-1.2440 for guidance. From a trading standpoint, look to reduce short exposure / raise protective stops on a stretch towards confluent resistance- losses should be limited to the lower parallel with a breach of the highs needed to suggest a more significant low was registered last month. There’s a good amount of event risk on tap so stay nimble heading into Friday’s US Non-Farm Payroll (NFP) / Canada Employment releases. Ultimately a break below 1.2285 could see another bout of accelerated losses for the greenback. 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 +2.85 (74.03% of traders are long) – typically bearish reading
  • Long positions are5.10% higher than yesterday and 11.14% lower from last week
  • Short positions are 3.27% higher than yesterday and 2.06% 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.

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Key US / Canada Data Releases

Key US / Canada Data Releases - USD/CAD Economic Calendar - Loonie Weekly Even Risk - FOMC, NFP, Canada Employment

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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