Canadian Dollar Technical Outlook: USD/CAD Reaches for Resistance

Canadian Dollar Technical Price Outlook: Near-term Trade Levels

• Canadian Dollar updated technical trade levels – Daily & Intraday Charts
• USD/CAD breakout pressing near-term uptrend resistance- constructive above 1.2503
• Resistance ~1.2680s, 1.2710(key)- Support 1.2586/93, 1.2565, 1.2503 (critical)

The US Dollar is off more than 0.70% against the Canadian Dollar since the start of the week a two-week rally in USD/CAD taking price towards key technical resistance. These are the updated targets and invalidation levels that matter on the USD/CAD price charts post-BoC. Review my latest Strategy Webinar for an in-depth breakdown of this Loonie technical setup and more.

Canadian Dollar Price Chart – USD/CAD Daily

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

Technical Outlook: In last month’s Canadian Dollar Price Outlook we highlighted a multi-week range in USD/CAD while noting , “rallies should be capped by 1.2766 IF price is indeed heading lower on this pullback with a break keeping the focus on the yearly low-day close (area of interest for possible exhaustion). Ultimately, we’re looking to validate a low in the days ahead to keep the broader 2021 uptrend viable.” USD/CAD plummeted more than 3.8% off the March high with price registering a low at 1.2402 before rebounding sharply off trend support into the April open. It’s important to keep in mind that the yearly opening-range is preserved here and from an objective standpoint, we’re just coming off range support. So the medium-term question: uptrend resumption, or just a bear market bounce?

Canadian Dollar Price Chart – USD/CAD 120min

Notes: A closer look at Loonie price action shows USD/CAD trading within the confines of an ascending pitchfork formation extending off the March / April lows. Initial resistance is eyed along the upper parallel (currently ~1.2680s) backed by a more significant technical confluence at the 61.8% Fibonacci retracement of the year-to-date range at 1.2710 – a breach / daily close above this threshold is needed to suggest more significant low was registered last week with such a scenario exposing the January high at 1.2813 and the yearly high-day close at 1.2880. Initial support rests at the early-March swing low / 38.2% retracement at 1.2586/93 backed by the objective weekly open at 1.2565. Near-term bullish invalidation raised to the April open at 1.2503.

Bottom line: The USD/CAD breakout has rallied back above the yearly open and keeps the focus on a confluent resistance at 1.2710. From a trading standpoint, a good zone to reduce portions of long-exposure / raise protective stops – losses should be limited to the monthly open at 1.2503 IF price is heading higher with a breach exposing topside objectives toward the yearly range highs. 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

• A summary of IG Client Sentiment shows traders are net-long USD/CAD - the ratio stands at +1.50 (60.04% of traders are long) – typically bearish reading
• Long positions are8.20% lower than yesterday and 20.14% lower from last week
• Short positions are 2.98% higher than yesterday and 38.18% 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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- Written by Michael Boutros, Technical Strategist with DailyFX

Follow Michael on Twitter @MBForex