Canadian Dollar Short-term Outlook: USD/CAD Bears Go for the Break

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

• USD/CAD poised to mark four-day decline / third weekly decline- down more than 2.6% off yearly high
• USD/CAD now testing confluent downtrend support- risk for inflection
• Resistance 1.3653, 1.3679(key), ~1.37- Support 1.36 (key), 1.3542, 1.3472

The US Dollar is poised to mark a fourth consecutive daily decline against the Canadian Dollar with USD/CAD now off more than 2.6% from the monthly / yearly high. The decline takes price into a major support hurdle which IF broken, could fuel another bout of losses for the greenback. Battle lines drawn on the USD/CAD short-term technical charts heading.

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Canadian Dollar Price Chart – USD/CAD Daily

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

Technical Outlook: In my last Canadian Dollar Short-term Outlook we note that a key technical reversal in USD/CAD was, “now testing at the first major support hurdle and we’re looking for a reaction here in the days ahead.” The region in focus was around the 1.37-handle and the level broke three-days later with USD/CAD now poised to mark a fourth consecutive day of losses.

The decline take price into the confluent support today at the December high-day close (HDC) / 200-day moving average at 1.3599- we’re looking for a reaction here with a break / close below needed to keep the immediate short-bias viable. Note that the 25% parallel of the proposed descending pitchfork extending off the yearly highs (blue) also converges on this region over the next few days and further highlights its technical significance.

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 trading within the confines of an embedded descending channel formation (red). Initial resistance is now eyed at 1.3653 and is backed by the objective weekly open at 1.3679- we’ll reserve this threshold as out near-term bearish invalidation level with a breach / close above the medina-line ultimately needed to suggest a more significant low is in place.

A break / close below this pivot zone exposes subsequent support objectives at the January swing high at 1.3542 and the 61.8% Fibonacci retracement of the December rally at 1.3472- look for a larger reaction there IF reached.        

Bottom line: USD/CAD is testing confluent downtrend support today and we’re looking for possible inflection off this mark. From a trading standpoint, a good zone to reduce portions of short-exposure / lower protective stops – rallies should be limited to 1.37 IF price is heading lower on this stretch with a close sub-1.36 needed to keep the bears in control- watch the weekly close here. 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.

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

Follow Michael on X @MBForex