Canadian Dollar Forecast: USD/CAD Bulls Vulnerable into 1.37

Canadian Dollar Technical Forecast: USD/CAD Weekly Trade Levels

• Canadian Dollar back on the defensive– down six of past seven weeks vs US Dollar
• USD/CAD rallies 4.41% off yearly-low now approaching multi-year trend resistance
• Resistance 1.3668, ~1.37, 1.3804 – Support 1.3545, 1.3488, 1.3386

The Canadian Dollar losses have continued to pile-up with USD/CAD pressing multi-month highs this week. The July rally is maturing here, and the bulls may be vulnerable in the days ahead as price approaches multi-year trend resistance. These are the updated targets and invalidation levels that matter on the USD/CAD weekly technical chart heading into the BoC.

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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, “USD/CAD is once again rebounding off well-defined lateral support- the immediate focus is on this stretch towards resistance. . . losses should be limited to the low-week close IF price is indeed heading higher.” Price rallied for the following three weeks with a breach above a key pivot zone (and our final cited target) at 1.3545/68, further validating the broader trend reversal back above the yearly moving average.

USD/CAD has now rallied more than 4.4% off the yearly lows with price now testing the April highs near 1.3668 (note that the 61.8% Fibonacci retracement of the 2022 decline rests at 1.3640). A more significant resistance zone is eyed just higher at the 78.6% Fibonacci retracement of the yearly range / the 2020 down-slope around the 1.37-handle – risk for topside exhaustion into either of these levels in the days ahead.

A pivot back below initial weekly support at 1.3545 would threaten a larger correction towards the 52-week moving average (currently ~1.3488) with broader bullish invalidation now raised to the 1.3387- both regions of interest for possible downside exhaustion IF reached.

A topside breach / close above 1.37 is needed to fuel the next leg higher in price with such a scenario exposing subsequent resistance objectives at the yearly high-close at 1.3804 and the 2022 high-week close at 1.3881.

Bottom line: 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 – losses should be limited to 1.3387 IF price is heading for a breakout of the 2020 trendline (blue). Keep in mind the Bank of Canada interest rate decision is on tap tomorrow with key employment data slated for Friday – stay nimble here and watch the weekly close.  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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