Canadian Dollar Short-term Outlook: USD/CAD Trump Rally Unravels

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

USD/CAD Trump rally falters into technical resistance- down nearly 1% off multi-year high
USD/CAD now testing initial support- risk for price inflection / larger correction
Resistance 1.4085/89 (key), 1.4189-1.42, 1.4310- Support 1.3978/90, 1.3935, 1.3881/99 (key), 1.3825

The US Dollar has been on the defensive since the start of the week with USD/CAD down nearly 1% from the post-election highs. The decline takes price into the first line of defense for the bulls and a break below could fuel a larger correction within the broader uptrend. We’re looking for a possible inflection off this key range in the days ahead. 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 my last Canadian Dollar Short-term Outlook we noted that USD/CAD was trading just below major resistance near 1.3978/90 on the heels of the US election and that the, “focus is on a breakout of the weekly opening-range- losses should be limited to the median-line IF USD/CAD is heading higher on this stretch with a close above the upper parallel needed to fuel the next major leg in price.”

USD/CAD held that range for nearly five days before finally breaking higher with a 2% rally off the monthly low exhausting last week at the 78.6% retracement of the 2020 decline at 1.4085. The bears are attempting to break back below that same pivot zone today at 1.3978/90- a region defined by the 2022 high and the 2020 March weekly-reversal close. Note that the 75% parallel converges on this zone today and a close below could threaten a larger pullback / suggest a that a mor significant near-term high was registered last week.

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 the USD/CAD continuing to trade within the confines of the ascending pitchfork we’ve been tracking off the September/October low. Note that a breach of the upper parallel last week failed at the 1.382% slope extension and keeps this formation in focus for now.

A break / close below this key pivot zone would expose the median / 100% extension around 1.3935 and the 2022 high-close / 2023 high at 1.3881/99- both areas of interest for possible downside exhaustion / price inflection IF reached. Broader bullish invalidation now raised to the August high-day close (HDC) at 1.3825. Losses below this threshold would suggest a larger trend reversal is underway.

A topside breach / daily close above the 78.6% retracement / weekly open at 1.4085/89 is needed to signal uptrend resumption. Subsequent resistance objectives at the 100% extension of the December advance at 1.4189-1.42 and the 61.8% extension of the broader 2021 advance at 1.4310.

Bottom line: A breakout of the monthly opening range is now testing initial support- looking for a reaction here. From a trading standpoint, a good zone to reduce portions of short-exposure / lower protective stops- rallies should be limited to the upper parallel (1.4060s) IF price is heading lower on this stretch with a close below 1.3978 needed to fuel the next leg lower.

Ultimately, losses would need to be limited to 1.3881 for the September uptrend to remain viable with a close above 1.4089 needed to mark uptrend resumption. Watch the weekly close 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.