Canadian Dollar Forecast: USD/CAD Battles at 1.3500

Canadian Dollar Technical Forecast: USD/CAD Weekly Trade Levels

Canadian Dollar two-week offensive fizzles at yearly moving average (~1.35)
USD/CAD pullback searching support– looking to validate exhaustion low in weeks ahead
Resistance 1.3545/68, 1.3697, 1.3804 – Support 1.3322, 1.3218, 1.3107/10

The Canadian Dollar mounted a counter-offensive off confluent resistance into the start of the month with a two-week decline in USD/CAD taking price into the yearly moving average around the 1.35-handle. The focus is on identifying a possible exhaustion low to complete a correction within the July uptrend. These are the updated targets and invalidation levels that matter on the USD/CAD weekly technical chart heading into the close of September.

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Canadian Dollar Price Chart – USD/CAD Weekly

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

Technical Outlook: In my last Canadian Dollar Technical Forecast we noted that the, “USD/CAD rally may be vulnerable early in the month as price approaches multi-year downtrend resistance. From a trading standpoint, look to reduce portions of long-exposure / raise protective stops on a stretch towards ~1.37…” Price registered a high at 1.3694 just two-days later before reversing sharply lower with a 2.3% decline pivoting back below a key technical confluence at 1.3545/68- a region define by the objective yearly open and the 61.8% Fibonacci retracement of the yearly range.

USD/CAD has been straddling the 52-week moving average for the past two-weeks and the focus is on validating a possible exhaustion low in the weeks ahead. Confluent support now rests at the 61.8% retracement of the July advance near 1.3322- losses should be limited to this threshold for the multi-month uptrend to remain viable.

Initial resistance steady at 1.3545/68 backed by the 78.6% retracement at 1.3697- a breach / weekly close above this threshold is needed to mark resumption of the July uptrend with such a scenario exposing the yearly high close at 1.3804 and the 2022 high-week close at 1.3881.

A break / close below the July uptrend would threaten a larger correction towards the yearly low-week close at 1.3218 and multi-year slope support around 1.3107/10.

Bottom line: USD/CAD remains vulnerable near-term, but the focus is on possible downside exhaustion in the weeks ahead. From a trading standpoint, losses should be limited to 1.3322 IF price is heading higher on this stretch with a close above the 1.37-handle needed to fuel the next major move. I’ll publish an updated Canadian Dollar Short-term Outlook once we get further clarity on the near-term USD/CAD technical trade levels.

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

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