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Canadian Dollar Outlook: USD/CAD Threatens January Uptrend- NFP Levels

Canadian Dollar Outlook: USD/CAD Threatens January Uptrend- NFP Levels

Michael Boutros, Strategist

Canadian Dollar Technical Price Outlook: Near-term Trade Levels

  • Canadian Dollar updated technical trade levels – Daily & Intraday Charts
  • USD/CAD snaps back into resistance at the yearly open- BoC / FOMC on tap
  • Resistance 1.2724 (key), 1.2767, 1.2813 - Support 1.2664, 1.2640 & 1.2582 (key)
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The US Dollar fell more than 0.75% against the Canadian Dollar since the start of the week with USD/CAD now testing the January uptrend ahead of key US / Canada employment data on Friday. 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 - USDCAD Technical Forecast

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

Technical Outlook: In last week Canadian Dollar Price Outlook we noted that USD/CAD the, “ recovery stretched into the December trendline before pulling back with the immediate focus now on confluent resistance at the objective yearly open / 38.2% retracement of the December decline at 1.2640/46- we’re looking for near-term inflection off this zone with a daily close above needed to validate the breakout.” Price spent three-days testing this resistance zone before breaking out with the rally briefly extending past the 61.8%Fibonacci retracement of the December decline at 1.2767 before pulling back. The focus now shifts to support as USD/CAD tests the slope of the broader uptrend- we’re looking for an exhaustion low in the days ahead.

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 continuing trading within the confines of the an ascending January lows with an embedded descending channel defining the recent pullback from uptrend resistance. Initial support now rests with the sliding parallel / 38.2% retracement of the January rally at 1.2664 with the objective yearly open just lower at 1.2640- a break below this threshold could risk a larger correction with broader bullish invalidation now raised to the 61.8% retracement at 1.2582. Initial resistance now stands with the yearly high-day close at 1.2724 with a breach / close above 1.2767 needed to mark resumption of the January advance targeting the yearly highs at 1.2813 and beyond.

Bottom line: The USD/CAD pullback is testing near-term uptrend support here – for now, we’re on the lookout for a possible exhaustion low. From a trading standpoint, a good zone to reduce short-exposure / lower protective stops- losses should be limited to the yearly-open IF price is heading higher with a breach of this near-term channel needed to shift the focus higher again. Keep in mind we have the release of US Non-Farm Payrolls (NFP) and Canada employment data on Friday- stay nimble 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 - USDCAD Technical Outlook
  • A summary of IG Client Sentiment shows traders are net-long USD/CAD - the ratio stands at +1.43 (58.88% of traders are long) – typically a weak bearish reading
  • Long positions are8.24% higher than yesterday and 5.92% lower from last week
  • Short positions are 13.03% higher than yesterday and 19.25% 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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US / Canada Economic Calendar

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