Canadian Dollar Technical Outlook: USD/CAD Slumps into Support

Canadian Dollar Technical Outlook: USD/CAD Slumps into Support

Canadian Dollar Technical Price Outlook: Near-term Trade Levels

  • Canadian Dollar updated technical trade levels – Daily & Intraday Charts
  • USD/CAD attempts to break multi-week range lows- recovery vulnerable below weekly open
  • Resistance 1.2705, 1.2766 (key)- Support 1.2613/40(key), 1.2514

The US Dollar is off more than 0.20% against the Canadian Dollar since the start of the week with USD/CAD threatening a break below a multi-week range. All eyes on tomorrow’s US Non-Farm Payroll report (NFP) as we look to validate this move lower in price. 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

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

Technical Outlook: In mylast Canadian Dollar Price Outlook we noted that the USD/CAD was, “coiling into the a tight range just above the yearly open – just below Fibonacci resistance. Look to the breakout for guidance in the days ahead.” What happened the following days was extraordinary with the USD/CAD ripping through the monthly range highs before reversing sharply to close out February near the range lows.

Another attempt to break and close below the yearly open materialized yesterday but once again price has reversed sharply off the lows – what is this nonsense? Obviously, the continued rally in oil and a barrage of war headlines has fueled added volatility and despite the whipsaw price action, the key technical levels remain unchanged. This ‘rubber band’ price action highlights the potential for a larger breakout to really run. Patience pays here.

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 trading within a near-term descending channel off the weekly highs with the lower parallel (red) further highlighting critical support at 1.2613/40– a region defined by the 61.8% Fibonacci retracement of the January rally, the 100% extension of the late-February decline and the 2020 yearly open. A break / close below this threshold is needed to fuel the next leg lower towards longer-term uptrend support / the yearly low-day close at 1.2514– look for a larger response there IF reached. Initial resistance now eyed at the February open at 1.2705 backed by the weekly open / 61.8% retracement of the recent decline at 1.2761/66– a breach / weekly close above this threshold is needed to suggest a more significant low is in place with such a scenario exposing the January highs at 1.2813 and another key Fibonacci confluence at 1.2850/53.

Bottom line: The Canadian Dollar has tempted breakouts on both sides of this multi-week range and we’re looking for some guidance heading into the close of the week / NFPs tomorrow. From a trading standpoint, 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. 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 Seniment - 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 +1.72 (63.20% of traders are long) – typically bearish reading
  • Long positions are8.31% higher than yesterday and 25.05% higher from last week
  • Short positions are 7.46% lower than yesterday and 22.34% 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 - NFP, Core Inflation on tap

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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Originally Posted on: https://www.dailyfx.com/forex/technical/home/analysis/usd-cad/2022/03/03/Canadian-Dollar-Technical-Outlook-USD-CAD-Slumps-into-Support-USDCAD-Forecast-MBTS3.html
By: Michael Boutros

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