USD/CAD Bulls at Risk – Loonie Trade Levels

The Canadian Dollar is firmer on the week but keep USD/CAD within the confines of the monthly uptrend heading into an extended holiday break and the close of November trade. The turn in price comes just ahead of a critical resistance range and we’re on the lookout for evidence of a near-term exhaustion high as price approaches uptrend support. These are the updated targets and invalidation levels that matter on the USD/CAD price charts. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this Loonie price setup and more.

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Canadian Dollar Price Chart – USD/CAD Daily

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

Technical Outlook: In my latest Canadian Dollar Price Outlook we noted that USD/CAD was, “approaching a critical resistance threshold and we’re on the lookout for near-term topside exhaustion up here.” The level in focus was 1.3335/55– a region defined by the September high-day close and the 61.8% retracement of the late-May decline. Price registered a high at 1.3328 last week before failing with the decline turning from longer-term downtrend parallel resistance. The move keeps price within the confines of the ascending channel formation we’ve been tracking for weeks now and the focus is on a test of slope support near ~1.3250s.

Canadian Dollar Price Chart – USD/CAD 240min

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

Notes: A closer look at Loonie price action shows USD/CAD rebounding off channel resistance last week with the pullback trading just above support at the 61.8% retracement of the September decline / Friday’s low at 1.3252/54. A break / close below this zone would be needed to suggest a larger correction is underway with such a scenario eyeing initial support objectives at 1.3219 and 1.3191 – an area of interest for possible downside exhaustion IF reached.

Weekly open resistance stands at 1.3295 with critical resistance steady at 1.3335/50– ultimately, the advance remains vulnerable while below this threshold. That said, a topside breach / close above would expose subsequent resistance objectives at 1.3385 and 1.3435/37.

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Bottom line: USD/CAD is pulling back just ahead of a major zone of lateral resistance at 1.3335/55. While we cannot rule-out another run at the highs, the broader October advance remains vulnerable while below this threshold heading into extended holiday break / the monthly close. From at trading standpoint, look for a reaction on a test of channel support for guidance with a break needed to solidify a larger correction in price. Failure at the lower parallel would shift the focus back towards key resistance. Review my latest Canadian Dollar Weekly Price Outlook for a closer look at the longer-term USD/CAD technical trading 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

  • A summary of IG Client Sentiment shows traders are net-short USD/CAD – the ratio stands at –2.27 (30.58% of traders are long) – bullish reading
  • Long positions are23.42% higher than yesterday and 31.10% higher from last week
  • Short positions are10.50% lower than yesterday and 4.16% lower 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. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current USD/CAD price trend may soon reverse lower despite the fact traders remain net-short.

See how shifts in USD/CAD retail positioning are impacting trend- Learn more about sentiment!

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– Written by Michael Boutros, Currency Strategist with DailyFX

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