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

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.