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

Article By: ,  Sr. Technical Strategist
November 6, 2024 8:19 PM

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

  • USD/CAD election rally erases weekly losses- risk for exhaustion/price inflection into technical resistance just higher
  • USD/CAD weekly opening-range break imminent- FOMC rate decision, Canada Employment report on tap
  • Resistance 1.3977/90 (key), 1.4085, 1.42- Support 1.3881/99, 1.3825/32 (key), 1.3792

The US Dollar is virtually unchanged this week with the Trump election-rally erasing an early-week loss of nearly 1%. The rebound puts a weekly opening-range breakout in focus with major technical resistance seen just higher. Battle lines drawn on the USD/CAD short-term technical charts ahead of the Fed.

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 trading just below resistance and that, “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.” Price straddled resistance for days before breaking higher with USD/CAD exhausting into uptrend resistance into November open.

The pullback rebounded off technical support yesterday with the post-election rally now testing the weekly-open at 1.3954. Key resistance remains unchanged at 1.3978/90- a region defined by 2022 high and the 2020 March weekly-reversal close. Note that the 75% parallel converges on this threshold over the next few days and while the broader outlook remains constructive, the immediate advance may be vulnerable while below this hurdle.  

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 continuing to trade within the confines of the ascending pitchfork we’ve been tracking off the September/October lows with the upper parallel further highlighting the 1.3978/90 resistance barrier.

Initial support rests with the 2023 high-close / 2023 high at 1.3881/99 and is backed by the August high-day close (HDC) / 23.6% retracement at 1.3825/32. Note that the weekly opening-range is preserved heading into Thursday, and we’ll be looking for a breakout to offer further guidance on our near-term directional bias.

A break lower exposes the June high at 1.3792 and 38.2% retracement of the September rally at 1.3753- We’ll reserve this threshold as our bullish invalidation level and a break / close below the lower parallel would be needed to suggest a more significant high was registered last week / a larger trend reversal is underway.

A topside breach / close above the upper parallel / 1.3990 is needed to mark uptrend resumption with such a scenario likely to fuel another accelerated breakout towards subsequent resistance objectives at 1.4085 and the 1.42-handle.

Bottom line: USD/CAD has erased the weekly losses with the post-election rally once again threatening a test of technical resistance just higher. While the broader outlook remains constructive, the immediate advance may be vulnerable while below 1.40. From a trading standpoint, the immediate 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.

Keep in mind the Federal Reserve interest rate decision is on tap tomorrow with Canada jobs data slated Friday. Stay nimble into the releases 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

 

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