Canadian Dollar Forecast: USD/CAD Bulls Restrained by Resistance

Canadian Dollar Technical Forecast: USD/CAD Weekly Trade Levels

Canadian Dollar snaps three-week losing streak – USD/CAD rally fails / reverses off 1.36
USD/CAD March opening-range set above uptrend support- FOMC on tap next week
Resistance ~1.3545, 1.3579, 1.3623/53– Support ~1.3430s, 1.3341, 1.3218/25

The Canadian Dollar snapped a three-week losing streak on Friday with USD/CAD reversing sharply off resistance at the yearly highs. The turn has already tested uptrend support and the focus now shifts to a breakout of the March opening-range for guidance here with the FOMC interest rate decision looming week. These are the updated targets and invalidation levels that matter on the USD/CAD weekly technical chart.

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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 last month’s Canadian Dollar Technical Forecast we noted that January rally was approaching technical resistance and that, “losses should be limited to by 2021 trendline (red) IF USD/CAD is heading higher on this stretch with a close above 1.3545 still needed to fuel the next leg higher in price.” The rally continued to test resistance for weeks and while price did mark a weekly-close just above, the rally quickly reversed off monthly uptrend resistance near the 1.36-handle last week with the pullback marking the largest weekly loss this year.

Price rebounded off uptrend support on Friday with USD/CAD now trading just above the 52-week moving average. Last week’s false-break threatens further losses in the days ahead and the immediate focus is on a breakout of the weekly / monthly range for guidance here.

Initial support rests with the late-January slope (currently ~1.3430s) and is backed by he highlighted confluence zone at the 61.8% Fibonacci retracement of December rally at 1.3341- a break / weekly close beyond this threshold would suggest a larger reversal is underway towards subsequent support objectives at the 2023 low-week close (LWC) / 38.2% retracement of the 2021 advance at 1.3218/25.

Initial weekly resistance remains at 1.3545 and is backed closely by the objective March-open at 1.3579. Key resistance is eyed at 1.3623/53- a region defined by the 61.8% retracement of the October sell-off and the 2023 high-week close (HWC). A breach / weekly close above this threshold is needed to suggest a larger breakout is underway towards the 2022 HWC around 1.3881.

Bottom line: The multi-month uptrend in USD/CAD failed into resistance last week and while the medium-term outlook remains constructive, the immediate advance may still be vulnerable here. From at trading standpoint, losses should be limited to 1.3341 for the 2024 advance to remain viable in the weeks ahead with a close above 1.3653 needed to fuel the next leg in price towards multi-year range highs. Keep in mind we get the release of key retail, inflation, and sentiment data ahead of next week’s highly anticipated Fed meeting- stay nimble here and watch the weekly closes. 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

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