Canadian Dollar Price Action Setups: USD/CAD, CAD/JPY, EUR/CAD

Canadian Dollar, CAD Talking Points:

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The Canadian Dollar continues to show extreme weakness and the currency is taking another leap-lower this morning.

The major pair of USD/CAD is now trading at a fresh three-week-high after breaking-out above the 1.3500 psychological level this morning. I had looked into the pair as part of yesterday’s US Dollar Price Action Setups, highlighting USD/CAD as one of the more attractive venues to work with USD-strength, largely due to that pervasive CAD-weakness that’s continued to show.

The 1.3465-1.3500 resistance zone is key in USD/CAD. This area had helped to set support in October and early-November before bears were finally able to break through. Price found support at 1.3224 and a rally built in an uneven manner, showing as a rising wedge. As price was working back up towards resistance, I looked at the possibility of fades from that zone and that showed up last week. But, sellers couldn’t stretch the move and a higher-low developed around a batch of confluent Fibonacci levels, plotted at around 1.3350 before bulls went back to work.

So, when that zone was coming back into the picture yesterday, sellers already had their chance and bulls responded with a higher-low, keeping the door open for breakout potential. And, as an additional factor, one look at USD/CAD compared to USD yesterday morning as DXY was grinding support highlighted that additional CAD-weakness that was helping to drive the pair higher.

USD/CAD Four-Hour Price Chart

Chart prepared by James Stanley; USDCAD on Tradingview

USD/CAD Longer-Term – The Next Test

Taking a step back to the daily chart and USD/CAD has another test on the way. This is at 1.3587 and it’s confluent with a bearish trendline taken from the recent highs. Price has already put in three really strong days of action, including today’s unfinished bar, so some planning is required.

If today’s high touches that resistance but fails to breakthrough, the door could open for a short-term fade, looking for price to move back for a re-test of support at prior resistance, from around the 1.3465-1.3500 zone.

If support shows in that area, the long side can become attractive again and with the litany of US drivers on the calendar for later this week, that can set up an interesting bullish USD-scenario with one of the currencies that’s been fairly weak of late.

USD/CAD Daily Price Chart

Chart prepared by James Stanley; USDCAD on Tradingview

CAD/JPY

CAD-weakness is on full display against the Japanese Yen. And while Canadian Dollar weakness has been an item of note in these pieces over the past month, a lack of clarity in USD made CAD/JPY the more enticing short setup earlier in the month. At the time, CAD/JPY had built a symmetrical triangle formation after setting a lower-high. There was also a longer-term trendline sitting just below price action and sellers made a quick push just a couple days later to test below both of those formations.

That breakdown then led into a short-term range which I looked at a week later, and that led to a further breakdown that’s continued to move and now two weeks after that last piece, CAD/JPY is sitting at a fresh three-month-low.

Price is now testing support at a key spot of confluence. At 101.93 we have the 23.6% retracement of the 2020-2022 major move. This is also around the prior swing low from last August and this price was also in-play to help set the low in June.

CAD/JPY Daily Chart

Chart prepared by James Stanley; CADJPY on Tradingview

CAD/JPY Shorter-Term

On a shorter-term basis, this could be a difficult spot to establish fresh exposure from, given the extended move and the test of confluent support.

This is also something that could be difficult to fade, as there’s no evidence yet of buyers putting in any element of response to that support. So, traders could try to exercise patience here in effort of catching lower-high resistance for bearish continuation scenarios.

The price action sequencing here has been rather clear with progressive lower-lows and highs. The most recent swing-low was around 102.30 and that becomes short-term resistance potential. The next zone higher

CAD/JPY Four-Hour Price Chart

Chart prepared by James Stanley; CADJPY on Tradingview

EUR/CAD

CAD weakness has similar been on full display here against the Euro. When I looked at the pair earlier this month, resistance was showing at the 200 day moving average around the 1.3500 level. Price had just put in a strong bounce from support at prior resistance, and that led to a breakout beyond the 200 DMA that’s technically still breaking out.

EUR/CAD Daily Chart

Chart prepared by James Stanley; EURCAD on Tradingview

EUR/CAD Resistance Watch

The more difficult part about working with the long side of EUR/CAD at the moment is just how fast the move has priced-in.

And, longer-term, there’s now some resistance to contend with. The price of 1.4062 is the 38.2% Fibonacci retracement of the 2020-2022 major move in the pair, and it’s confluent with the 1.4000 psychological level. This is some pretty heavy resistance much less for a market that’s gained more than 1,000 pips over the past couple of months in a really strong bounce.

This isn’t necessarily a direct fade setup given the strength of the trend, but if sellers can work price back below the 1.4000 level, that door for short-term reversals could quickly re-open.