Canadian Dollar Technical Forecast: USD/CAD Breakout Unfolds

Canadian Dollar Technical Forecast: USD/CAD Weekly Trade Levels

USD/CAD breakout underway- bulls attempt four-week rally to fresh multi-year highs
USD/CAD now approaching initial resistance objectives- FOMC, Core PCE on tap
Resistance 1.4189-1.42 (key), 1.4357, 1.4538– Support 1.3984/90, 1.3881/99 (key), 1.3773

The US Dollar is poised to mark a fourth consecutive weekly advance against the Canadian Dollar with a breakout in USD/CAD surging to fresh multi-year highs. All eyes now fall on the Fed with the December interest rate decision on tap later today. Battle lines drawn on the USD/CAD weekly technical chart.

Canadian Dollar Price Chart – USD/CAD Weekly

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

Technical Outlook: In last month’s Canadian Dollar Technical Forecast we noted that the USD/CAD rally had extended into resistance and that, “From a trading standpoint, pullbacks would need to be limited to 1.3881 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 held resistance for two-weeks before breaking higher with price rallying more than 2.3% since the start of the month.

A slight adjustment to our slope keeps USD/CAD within the confines of the ascending pitchfork we’ve been tracking off the September lows. Initial weekly resistance is eyed at the 2020 high-week close at 1.4357 and is backed by more significant confluent zones at the 1.618% extension of the 2023 advance at 1.4482 and the 2016 close high at 1.4538. Note that the upper parallel converges on these levels into the close of the year and both levels represents areas of interest for possible topside exhaustion / price inflection IF reached.

Initial weekly support rests back at 1.4189-1.42 with medium-term bullish invalidation now raised to the highlighted median-line confluence around 1.4098-1.4115- a break / close below this threshold would suggest a more significant high was registered / threaten a larger correction within the yearly uptrend. Subsequent support objectives rests wit the 2020 March reversal close at 1.3990 and the 2022 high-week close (HWC) / 2023 high at 1.3881/99.

Bottom line: The USD/CAD breakout is approaching initial resistance objectives just higher with major event risk on tap into the close of the week. From a technical standpoint, the outlook remains constructive while above the median-line / 1.41. From at trading standpoint, losses should be limited to this week’s low IF price is heading higher on this stretch with a close above 1.4358 needed to keep the focus on a stretch towards the upper parallel / 1.4480- look for a larger reaction there IF reached.

Keep in mind the FOMC interest rate decision is on tap later today with key US inflation data slated for Friday. Stay nimble into the releases and watch the weekly close here for guidance. Review my latest Canadian Dollar Short-term Outlook for a closer look at the near-term USD/CAD technical trade levels.

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Economic Calendar - latest economic developments and upcoming event risk.

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--- Written by Michael Boutros, Sr Technical Strategist with FOREX.com

Follow Michael on X @MBForex

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