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 1.2640, 1.2724(key) – Support 1.2605, 1.2574 & 1.2546 (key)

The US Dollar has rallied more than 2% off the monthly lows against the Canadian Dollar with USD/CAD now virtually unchanged for the year. All eyes now fall on major central bank interest rate decisions tomorrow with the BoC and FOMC on tap. 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 - 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, “The focus remains on this pivot-zone with the broader decline vulnerable while above 1.2432. Form a trading standpoint, be on the lookout for an exhaustion low with a breach above the weekly range highs needed to fuel a larger recovery.” Key support at the 78.6% Fibonacci retracement of the October rally / 100% extension of the December decline at 1.2432/70 held,with USD/CAD rallying 2.02% off the lows in just three days. 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.

Canadian Dollar Price Chart – USD/CAD 120min

Canadian Dollar Price Chart - USD/CAD 120min - Loonie Trade Outlook - Technical Forecast

Notes: A closer look at Loonie price action shows USD/CAD continuing trading within the confines of the descending pitchfork extending off the December highs with and embedded ascending structure defining the recent breakout in price. Initial support now eyed at 1.2605 backed by the lower parallel / weekly open at 1.2574– losses should be limited to this level IF price is indeed heading for a breakout. Ultimately a close below the 61.8%retracement at 1.2546 would be needed to mark resumption of the broader downtrend.

A breach of the highs keeps the focus on the yearly / monthly high-day closer at 1.2724– a daily close above this threshold would suggest a more significant low is in place and validate a breakout of the December downtrend. Subsequent resistance objectives on topside eyed at the 61.8% retracement at 1.2772 backed by the yearly range highs at 1.2813– look for a larger reaction there IF reached.

Bottom line: The recovery off key support has failed at key resistance- the stage is set heading into the BoC and FOMC rate decisions tomorrow. From a trading standpoint, be on the lookout for downside / exhaustion ahead of the weekly open on pullbacks with a breach / close above December downslope needed to suggest a larger reversal is underway. Beware of a break of the recent upslope- losses could be rather accelerated with such a scenario shifting the focus back towards the 1.2432 support. As always, stay nimble here and watch the closes. 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 - Technical Outlook

  • A summary of IG Client Sentiment shows traders are net-long USD/CAD – the ratio stands at +1.81 (64.40% of traders are long) – typically bearish reading
  • Long positions are3.33% higher than yesterday and 18.74% lower from last week
  • Short positions are 16.26% higher than yesterday and 26.55% 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.

Key US / Canada Data Releases

US / Canada Economic Calendar - USD/CAD Event Risk - Loonie Data Releases

Economic Calendarlatest economic developments and upcoming event risk.

Active Technical Setups

– Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex





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