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Canadian Dollar Technical Outlook: USD/CAD Plunges into Pivotal Range

Canadian Dollar Technical Outlook: USD/CAD Plunges into Pivotal Range

Michael Boutros, Strategist

Canadian Dollar Technical Price Outlook: Near-term Trade Levels

  • Canadian Dollar updated technical trade levels – Daily & Intraday Charts
  • USD/CAD pullback now testing major support- risk for near-term price inflection
  • Resistance 1.2730s, 1.2819, 1.2880/96 (critical)- Support 1.2640/76 (key), 1.2546, 1.2503
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The Canadian Dollar counter-offensive against the US Dollar is working on its fourth consecutive week with USD/CAD off more than 3.4% from the May high. The sell-off takes price into downtrend support and we’re looking for possible price inflection heading into key event risk this week with the BoC & Non-Farm Payrolls on tap. These are the updated targets and invalidation levels that matter on the USD/CAD technical price charts. Review my latest Strategy Webinar for an in-depth breakdown of this Loonie 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 USD/CAD was testing near-term uptrend support while warning that a, “break lower would threaten a larger correction towards the next major support zone at the April opening-range highs / 61.8% retracement / 2022 yearly open at 1.2640/76.” Price is testing this key pivot zone today with the Bank of Canada (BoC) interest rate decision on tap tomorrow.

Canadian Dollar Price Chart – USD/CAD 240min

Canadian Dollar Price Chart - USD/CAD 240min - Loonie Trade Outlook - USDCAD Technical Forecast

A closer look at Loonie price action shows USD/CAD trading within the confines of a descending median-line formation extending off the May highs with the lower parallel further highlighting near-term support at 1.2640/76. Initial resistance now at the 25% parallel (currently ~1.2730s) backed by 1.2819. Bearish invalidation now lowered to the March high-day close / 61.8% Fibonacci retracement of the May range at 1.2880/96. A break lower from here would expose subsequent support objectives at 1.2546, the April open at 1.2503 and the January low at 1.2450- both levels of interest for possible downside exhaustion IF reached.

Bottom line: USD/CAD is now testing near-term downtrend support and we’re looking for a reaction / price inflection here- watch the close. From a trading standpoint, a good zone to reduce portions of short-exposure / lower protective stops – rallies should be capped by 1.2819 IF price is indeed heading lower on this stretch. Tread lightly into the monthly open with major event risk on tap into the close of the week. 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 +1.62 (61.83% of traders are long) – typically bearish reading
  • Long positions are20.08% higher than yesterday and 35.20% higher from last week
  • Short positions are 8.91% lower than yesterday and 4.53% 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 further net-long than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger USD/CAD-bearish contrarian trading bias from a sentiment standpoint.

US / Canada Economic Calendar

US / Canada Economic Calendar - USD/CAD Weekly Event Risk

Economic Calendar - latest economic developments and upcoming event risk

Active Technical Setups

- Written by Michael Boutros, Technical 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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