Canadian Dollar Short-term Price Outlook: USD/CAD Rally Under Review

Canadian Dollar Technical Price Outlook: Short-term Trade Levels

Canadian Dollar updated technical trade levels – Daily & Intraday Charts
USD/CAD rebound off downtrend support eyes resistance- Weekly/monthly range breakout pending
Resistance 1.2938/52, 1.3025 (key), 1.3076- Support 1.2794, 1.2716, 1.2640 (key)

The Canadian Dollar is off more than 0.9% against the US Dollar since the start of the week with USD/CAD rallying into downtrend resistance today. The move keeps the focus on a breakout of the weekly range as we look to validate whether or not a more significant low was registered last week. 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

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

Technical Outlook: In my last Canadian Dollar Short-term Price Outlook, we noted that USD/CAD had, “rebounded off downtrend support with the recovery now testing the median-line ahead of major event risk. From at trading standpoint, the focus is on a breakout of the weekly opening-range for guidance with the threat for a larger recovery within the downtrend.” The rebound off downtrend support covered nearly the entire monthly range with USD/CAD rallying more than 1.6% off the August low. The rally faltered at the 75% parallel (blue) / just ahead of a major resistance pivot at the 2021 high-day close / 2019 low at 1.2939/52. The focus is on this pullback with daily support eyed back at the objective monthly open at 1.2794.

Canadian Dollar Price Chart – USD/CAD 240min

Notes: A closer look at Loonie price action shows USD/CAD continuing to trade within the confines of a descending pitchfork formation extending off the July high with price turning from parallel resistance in early US trade today. Bearish invalidation now lowered to the July 15th reversal close at 1.3025– a breach / daily close above this threshold is needed to mark resumption of the broader USD/CAD uptrend.

Once again, the immediate focus is on a breakout of the weekly opening-range with a close below the 61.8% Fibonacci retracement of the yearly range at 1.2716 needed to mark resumption of the July downtrend towards the objective yearly open at 1.2640– look for a larger reaction in price there IF reached.

Bottom line: USD/CAD has set the weekly opening-range just below a key resistance pivot and we’re looking for a breakout in the days ahead to offer some guidance here. From at trading standpoint, a good zone to reduce long-exposure / raise protective stops – losses should be limited to the monthly open IF price is heading higher on this stretch. 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

A summary of IG Client Sentiment shows traders are net-short USD/CAD – the ratio stands at -1.17 (46.08% of traders are long) – typically weak bullishreading
Long positions are2.34% lower than yesterday and 32.50% lower from last week
Short positions are 24.29% higher than yesterday and 49.15% higher 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. Traders are further net-short than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger USD/CAD-bullish contrarian trading bias from a sentiment standpoint.