Canadian Dollar Technical Forecast: USD/CAD Stretches for the Break

Canadian Dollar Technical Forecast: USD/CAD Weekly Trade Levels

• Canadian Dollar updated technical trade levels - Weekly Chart
• USD/CAD attempting breakout of critical resistance zone- focus is on weekly close
• Weekly support 1.2729, 1.2535/46 (critical) – Resistance 1.2768-1.2814 (key), 1.2975-1.3023

The Canadian Dollar is off more than 0.75% against the US Dollar since the start of the week with USD/CAD attempting to breakout of a multi-week range below key technical resistance. The focus is on a potential breakout here with the weekly close above needed to clear the way for the US Dollar bulls. These are the updated targets and invalidation levels that matter on the USD/CAD weekly technical price chart. 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

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

Notes: In last month’s Canadian Dollar Weekly Technical Forecast we noted that, “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.” For nearly seven-weeks price held below this critical resistance zone despite significant US Dollar strength – the focus now shifts to this attempt at breaching this key threshold.

The initial breakout doesn’t look good with price exhausting quickly after the breach- still the focus is on a weekly close with respect to 1.2768-1.2814. Initial support now rest back at the 25% parallel (currently near the weekly open at ~1.2729) backed by broader bullish invalidation at the confluence of the 61.8% Fibonacci retracement of the October rally and the 2021 high-week reversal close near the lower parallel at 1.2535/46. A breach higher from here exposes the median-line (currently ~1.2930s) and critical resistance at the 2020 yearly open / 38.2% retracement of the 2020 decline at 1.2975-1.3023.

Bottom line: USD/CAD is attempting to breakout above a major technical pivot zone that has capped price since the start of the year. Keep in mind the US Dollar attempted this breach two-weeks ago but closed lower on the week- watch the close. From at trading standpoint, a good zone to reduce portions of long-exposure / raise protective stops – losses should be limited to the weekly open IF price is heading higher on this stretch. Note that Canada employment figures are on tap Friday with the FOMC looming next week- stay nimble here. 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

• A summary of IG Client Sentiment shows traders are net-short USD/CAD - the ratio stands at -1.22 (45.07% of traders are long) – typically weak bullish reading
• Long positions are15.56% lower than yesterday and 25.87% lower from last week
• Short positions are 9.25% higher than yesterday and 18.10% higher from last week
• We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USD/CAD prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger USD/CAD-bullish contrarian trading bias from a sentiment standpoint.

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--- Written by Michael Boutros, Technical Currency Strategist with DailyFX

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