Canadian Dollar Technical Forecast: USD/CAD Threatens Larger Setback

Canadian Dollar Technical Forecast: USD/CAD Weekly Trade Levels

• Canadian Dollar updated technical trade levels – Weekly Chart
• USD/CAD pullback rebounds off initial support – threat for deeper setback remains
• Support 1.3512, 1.3370/84, 1.3224 – Resistance 1.3971 (key), 1.4098, 1.4336

The US Dollar plunged more than 3.4% from the highs against the Canadian Dollar with USD/CAD marking the second consecutive weekly decline last week. A three-day rally has already recovered more than 1% off the lows and despite the gains, the pair remains vulnerable heading into November after reversing off confluent resistance with major event risk on tap this week. These are the updated targets and invalidation levels that matter on the USD/CAD weekly technical price chart heading into November. Review my latest Strategy Webinar for an in-depth breakdown of this Loonie setup and more.

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Canadian Dollar Price Chart – USD/CAD Weekly

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

Notes: In my last Canadian Dollar Weekly Technical Forecast, I noted that the, “USD/CAD breakout has now extended into confluent trend resistance- risk for possible topside exhaustion / price inflection into this threshold.” The region in focus at the 2020 March reversal-close at 1.3971 and defined the highs that week (high registered at 1.3977).

The subsequent pullback rebounded off initial support last week at the October range lows / 23.6% Fibonacci retracement of the 2021 advance at 1.3502/12 and while the broader outlook remains constructive, the threat for a deeper correction remains while below the yearly high-week close at 1.3881.

The October range is preserve heading into November- look for the breakout. A daily close below confluent support would expose subsequent objectives at the 2018 high-week close at 1.3370 and the 38.2% retracement at 1.3225– both zones of interest for possible exhaustion / price inflection IF reached.

Bottom line: USD/CAD remains vulnerable to a deeper pullback within the broader uptrend heading into the November open. From a trading standpoint, be on the lookout for an exhaustion low next month-ultimately a breach / close above 1.3971 is needed to make resumption of the 2021 uptrend towards 1.41. Keep in mind it’s a BIG week of event risk with the FOMC interest rate decision, Non-Farm Payrolls (NFP) and Canada Employment data on tap into the start of the month- stay nimble into the close of the week. I’ll publish an updated Canadian Dollar Shor-term Price Outlook once we get further clarity on the near-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 -1.61 (38.35% of traders are long) – typically bullish reading
• Long positions are 11.81% higher than yesterday and 14.77% higher from last week
• Short positions are 18.78% higher than yesterday and 10.68% 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. Trader are more net-short than yesterday but less net-short from last week. The combination of current positioning and recent changes gives us a further mixed USD/CAD trading bias from a sentiment standpoint.

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— Written by Michael Boutros, Technical Strategist with DailyFX

Follow Michael on Twitter @MBForex