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Canadian Dollar Technical Forecast: USD/CAD Gearing up for the Break

Canadian Dollar Technical Forecast: USD/CAD Gearing up for the Break

Michael Boutros, Strategist

Canadian Dollar Technical Forecast: USD/CAD Weekly Trade Levels

  • Canadian Dollar updated technical trade levels - Weekly Chart
  • USD/CAD January rally halted at key pivot zone- US CPI on tap
  • Weekly support 1.2640, ~1.2424 (critical) – Resistance 1.2768-1.2814 (key), 1.2975-1.3023
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The Canadian Dollar attempting to mount a counteroffensive against the US Dollar early in the month after USD/CAD rallied more than 2.7% off the January lows. The move takes price into a major technical pivot zone and we’re on the lookout for a possible exhaustion low in the days ahead. These are the updated targets and invalidation levels that matter on the USD/CAD weekly technical price chart heading into key US & Canada inflation reports. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this Loonie technical setup and more.

Canadian Dollar Price Chart – USD/CAD Weekly

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

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

Notes: In last month’s Canadian Dollar Weekly Technical Forecast we highlighted the threat for deeper pullback in USD/CAD while noting to , “be on the lookout for a reaction / possible exhaustion low ahead of 1.2530s early in the month…” The US Dollar plummeted more than 3.7% off the December highs to briefly register an intra-week low at 1.2450 before rebounding off the lower parallel.

USD/CAD held key support at the 52-week moving average on a weekly close basis with the subsequent recovery stretching into key resistance into the close of January at 1.2768-1.2814- a region defined by the 61.8% Fibonacci retracement of the December decline and the 2021 high-week reversal close. A topside breach / weekly close above this threshold is needed to mark resumption of the broader uptrend with such a scenario exposing the median-line (currently ~1.29) and critical resistance at the 2020 yearly open / 38.2% retracement of the 2020 decline at 1.2975-1.3023. Initial weekly support rests at the yearly open at 1.2640 with broader bullish invalidation steady at the 52-week moving average / lower parallel near ~1.2524- look for a low ahead of this threshold IF USD/CAD is indeed heading higher.

Bottom line: A rebound off uptrend support takes USD/CAD into a major technical pivot zone at 1.2768-1.2814- look for a break of the monthly opening-range for guidance with the broader outlook weighted to the topside while within this formation off the 2021 lows. From a trading standpoint, be on the lookout for an exhaustion low ahead of 1.2524 in the weeks ahead with a breach higher keeping the focus on slope resistance near the 2021 highs. Keep in mind we get key inflation reports from the US & Canada over the next week- expect volatility and be mindful of the weekly closes. Review my latest Canadian Dollar Price Outlook for a closer look at the near-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 +1.71 (63.1% of traders are long) – typically bearish reading
  • Long positions are4.68% lower than yesterday and 4.39% higher from last week
  • Short positions are 18.13% higher than yesterday and 12.58% 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 less net-long than yesterday but more 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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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 Weekly Technical Charts

--- Written by Michael Boutros, Technical 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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