Canadian Dollar Short-term Outlook: USD/CAD Breakout Imminent

Canadian Dollar Technical Outlook: USD/CAD Short-term Trade Levels

USD/CAD rally stalls into uptrend resistance- January range taking shape just below
Threat for larger correction remains – key U.S. / Canada inflation data on tap
Resistance 1.4422, 1.4448 (key), 1.4513- Support 1.4332, 1.4260, 1.4189-1.42

The US Dollar may be poised to snap a four-month winning streak against the Canadian Dollar with USD/CAD holding a well-defined range just below uptrend resistance. We are on breakout watch with key U.S. / Canadian inflation data on tap. Battle lines drawn on the USD/CAD short-term technical charts.

Canadian Dollar Price Chart – USD/CAD Daily

Chart Prepared by Michael Boutros, Sr. Technical Strategist; USD/CAD on TradingView

Technical Outlook: In last month’s Canadian Dollar Short-term Outlook we noted that USD/CAD was testing technical resistance and that, “losses would need to be limited to the median-line IF price is heading higher on this stretch with a close above 1.42 needed to fuel the next leg of the advance.” USD/CAD broke through the 1.42-handle two-days later with the subsequent rally extending 3.4% off the December low.

The rally exhausted into confluent resistance at the upper parallels last month with the January opening-range taking shape just below. Looking for the breakout in the days ahead with a breach / close above this slope needed to fuel the next major leg of the advance.

Canadian Dollar Price Chart – USD/CAD 240min

Chart Prepared by Michael Boutros, Sr. Technical Strategist; USD/CAD on TradingView

Notes: A closer look at Canadian Dollar price action shows USD/CAD trading within a proposed descending pitchfork formation extending off the highs. While it is too early to rely on this slope, it does highlight initial resistance at the objective weekly open at 1.4422 and support at the January low-day close (LDC) at 1.4332. The immediate focus is on a breakout of this range for guidance.

A break below the September channel (red) exposes subsequent support objectives at the 100% extension of the December decline at 1.4260 and the 100% extension of the 2023 advance a 1.4189 / 1.42 – look for larger reaction there IF reached. Broader bullish invalidation for the broader now raised to medina-line near the 1.41-handle.

A topside breach / close above the 2024 high-close at 1.4447 is needed to fuel a rally towards the 2020 high-day close (HDC)- look for a larger reaction there IF reached. A rally surpassing this level would threaten another accelerated advance toward the 1.46-handle and the 1.618% extension at 1.4664.

Bottom line: The USD/CAD rally remains vulnerable while below the 2024 high-close with the January opening-range taking shape just below- the immediate focus is on a breakout of the 1.4332-1.4422 range. Ultimately, losses would need to be limited to 1.4260 IF price is heading higher on this stretch with a close above 1.4448 needed to fuel the next leg of the advance.

Keep in mind we get the release of key inflation data (CPI) from the U.S. tomorrow and Canada early next week. Stay nimble into the releases and watch the weekly closes here for guidance. Review my latest Canadian Dollar Weekly Technical Forecast for a closer look at the longer-term USD/CAD trade levels.

Key USD/CAD Economic Data Releases

Economic Calendar - latest economic developments and upcoming event risk.

Active Short-term Technical Charts

Written by Michael Boutros, Sr Technical Strategist

Follow Michael on X @MBForex

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.