Canadian Dollar Short-term Price Outlook: USD/CAD Rebound Faces NFP

Canadian Dollar Technical Price Outlook: Short-term Trade Levels

Canadian Dollar updated technical trade levels – Daily & Intraday Charts
USD/CAD rebound off downtrend support threatens larger recovery- key Jobs data on tap
Resistance 1.2938/51, 1.3025, 1.3076 (key)- Support 1.2784, 1.2716 (key), 1.2640

The Canadian Dollar has been on defense against the US Dollar since the start of the month with USD/CAD rebounding more than 0.8% off downtrend support. The focus shifts to this recovery heading into key employment data tomorrow from the US & Canada with a well-defined weekly opening-range now in view ahead of the releases. 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 last month’s Canadian Dollar Short-term Price Outlook, we noted that USD/CAD had, “plunged into support at the July open / monthly low – looking for inflection here.” The dollar continued to grind lower into the July close before rebounding off the June low-week reversal close / 25% parallel at ~1.2784. The focus is on this early month recovery heading into major event risk tomorrow with US Non-Farm Payrolls and Canada employment on tap.

Canadian Dollar Price Chart – USD/CAD 240min

Notes: A closer look at Loonie price action shows USD/CAD trading within the confines of a descending pitchfork formation extending off the July high with price testing the median-line as resistance early in the week. A topside breach would threaten a larger recovery towards initial resistance at the 2021 high-day close / 2019 low at 1.2939/52 backed by the July 15th reversal close at 1.3025. Broader bearish invalidation now lowered to the May high at 1.3076– a close above this threshold would be needed to mark resumption of the broader uptrend.

A break lower from here keeps the focus on subsequent support objectives at the 61.8% Fibonacci retracement of the yearly range at 1.2716– look for a larger reaction there IF reached with a close below needed to keep the medium-term short-bias viable towards the objective 2022 yearly open at 1.2640.

Bottom line: USD/CAD has 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. Stay nimble early in the month- likely to get some volatility here. 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-long USD/CAD – the ratio stands at +1.20 (54.55% of traders are long) – typically weak bearish reading
Long positions are2.73% lower than yesterday and 3.53% higher from last week
Short positions are 7.24% higher than yesterday and 5.33% 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. From a sentiment standpoint, the recent changes in positioning warn that the current USD/CAD price trend may soon reverse higher despite the fact traders remain net-long.