Canadian Dollar Short-term Outlook: USD/CAD at Resistance- BoC on Tap

Article By: ,  Sr. Technical Strategist

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

  • USD/CAD rally testing technical resistance ahead of Bank of Canada interest rate decision
  • Risk for topside exhaustion / price inflection- weekly opening-range break imminent
  • Resistance 1.3825/34 (key), 1.3881/99, 1.3977/90- Support 1.3792, 1.3745, 1.37 (key)

The US Dollar surged more than 3.2% off the September lows in USD/CAD with price testing confluent technical resistance ahead of tomorrow’s Bank of Canada interest rate decision. Battle lines are 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 turned from multi-month lows last month and the immediate focus remains on this near-term recovery. From at trading standpoint, losses should be limited to 1.3472 IF price is heading higher on this stretch – look for a larger reaction on test of the median-line for guidance.”

USD/CAD ripped through median-line resistance three-days later with the rally extending more than 2.9% off the September low. The bulls have been halted this week at a major technical confluence ahead of tomorrow’s BoC rated decision at 1.3825/34- a region defined by the objective 2024 high-day close (HDC) and the 78.6% retracement of the August decline. The focus is on possible price inflection off this zone with the immediate rally vulnerable while below.

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 the confines of the ascending pitchfork we’ve been tracking off the August / September lows with the rally failing a second attempt to breach resistance this week. Initial support rests with the June high at 1.3792 and is backed by the 61.8% retracement / last week’s low at 1.3746/47 and the 1.37-handle- losses should be limited to this threshold IF price is heading higher on this stretch. Broader bullish invalidation rests at with the March high / 38.2% retracement at 1.3613/21.

A topside breach / close above this pivot zone is needed to mark uptrend resumption toward the next major technical consideration at the 2022 high-close / 2023 high at 1.3881/99. Look for a larger reaction there IF reached with a breakout of the uptrend to threaten another accelerated push towards the 2022 high / 2020 March weekly reversal close at 1.3977/90- an area of interest for possible topside exhaustion / price inflection IF reached.

Bottom line: The USD/CAD rally is wrestling resistance here for a second week with the objective weekly opening-range taking shape just below ahead of tomorrow’s rate decision. From a trading standpoint a good zone to reduce portions of long-exposure / raise protective stops- losses should be limited to the median-line IF price is going for a breakout here with a close above 1.3835 needed to fuel the next leg in price.

Keep in mind the markets are currently pricing a 50-basis point cut from the Bank of Canada tomorrow. Stay nimble into the release and 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

 

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

© City Index 2024