Canadian Dollar Technical Forecast: USD/CAD Bulls Charge Resistance

Canadian Dollar Technical Forecast: USD/CAD Weekly Trade Levels

• USD/CAD attempting to mark two-week rally off technical support / September-low
• Bulls testing initial resistance hurdle into monthly highs- threat for topside exhaustion / price inflection
• Resistance 1.3621/47, ~1.3700, 1.3753/73 (key)– Support 1.3517, 1.3471 (key), 1.3342/59

USD/CAD surged nearly 1.6% off the September lows with the rally now approaching the first major test of resistance. Battle lines drawn on the USD/CAD weekly technical chart heading into US CPI.

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 USD/CAD had, “plunging back into support at the monthly-open; looking for a reaction down here. From trading standpoint, a good zone to reduce portions of short-exposure / lower protective stops – rallies should be limited to 1.36 IF price is heading lower on this stretch with a close below 1.3471 needed to fuel the next leg.”

Despite registering an intraweek low at 1.3419, the bears were unable to mark a weekly close sub-1.3471 with the subsequent rally taking USD/CAD into confluent resistance this week at 1.3621/47- a region defined by the 38.2% retracement of the August decline and the September swing high. Note that the median-line of the descending pitchfork also converges on this threshold and a weekly close above is needed to suggest a more significant low was registered last month.

Initial weekly support now rests with the September low-week close (LWC) at 1.3517 and is backed again by 1.3471- a break / close below this level is still needed to mark downtrend resumption / validate a break of the 2022 uptrend. The next major lateral consideration rests with the 78.6% retracement / 2024 LWC at 1.3342/60.

A topside breach / close above the September highs / median-line is needed to keep the immediate long-bias viable with subsequent resistance objectives eyed at the 1.37-handle and 1.3745/73- a region defined by the 61.8% retracement and the April high-close (HC). Look for a larger reaction there IF reached with a breach / close above needed to invalidate the August downtrend.

Bottom line: A reversal off support at multi-month lows takes USD/CAD into the first level of technical resistance- risk for possible price inflection here. From at trading standpoint, a good zone to reduce portions of long-exposure / raise protective stops- losses should be limited to 1.3517 IF price is heading for a breakout here with a close above 1.3647 needed to fuel the next leg higher.

Keep in mind we get the release of key US inflation data this week with the August Consumer Price Index (CPI) on tap Thursday. Stay nimble into the release 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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--- Written by Michael Boutros, Sr Technical Strategist with FOREX.com

Follow Michael on X @MBForex