USD/CAD Plummets to Fresh Weekly Lows

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The Canadian Dollar turned positive on the week against the US Dollar today with the recent USD/CAD reversal` off key resistance now approaching near-term downtrend support.. These are the updated targets and invalidation levels that matter on the USD/CAD weekly chart. Review my latestWeekly Strategy Webinar for an in-depth breakdown of this Sterling 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 the, “recent decline keeps the risk weighted to the downside targeting the lower bounds of the range.” USD/CAD is down more than 0.4% off the weekly highs with price now approaching downslope support at the median-line of the broader descending pitchfork formation we’ve been tracking off the yearly highs. A break / close below this slope is needed to keep the short-bias viable targeting more significant support at 1.3145/55– look for a bigger reaction there IF reached. Monthly open resistance stands at 1.3240 with broader bearish invalidation steady at 1.3280/87 – a region defined by the 61.8% retracement of the September and October declines.

Canadian Dollar Price Chart – USD/CAD 120min

Canadian Dollar Price Chart - USD/CAD 120min - Loonie Trade Outlook - Technical Forecast

Notes: A closer look at Loonie price action shows USD/CAD trading within the confines of a near-term descending pitchfork formation with price now approaching the lower parallel near last week’s low at 1.3171– a break there would keep the focus on 1.3145/55 with weakness beyond this region needed to fuel the next leg lower in price. Weekly open resistance stands at 1.32 backed by the weekly opening-range highs / monthly open / 38.2% retracement at 1.3238/40.

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Bottom line: USD/CAD is approaching near-term downtrend support. From a trading standpoint, look to reduce short-exposure / lower protective stops on a move towards 1.3171 and more importantly 1.3145/55 – look for a bigger reaction. For now, we’ll favor fading weakness while below the monthly open targeting a test of key support. Review my latest Canadian Dollar Weekly 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 - Loonie Trade Outlook - Technical Forecast

  • A summary of IG Client Sentiment shows traders are net-short USD/CAD – the ratio stands at -1.48 (40.25% of traders are long) – weak bullish reading
  • Long positions are3.93% higher than yesterday and 15.48% higher from last week
  • Short positions are 6.90% lower than yesterday and 20.73% 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.

Follow Michael on Twitter @MBForex

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