Canadian Dollar Short-term Outlook: USD/CAD Bulls Face the Fed, NFPs

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

• Canadian Dollar posts largest daily loss (USD/CAD rally) since February ahead of Fed / NFP
• USD/CAD bulls vulnerable below resistance at yearly high- constructive while within December uptrend
• Resistance 1.3800, 1.3848/81 (key), 1.3977/90- Support 1.3671, 1.3599-1.3623, 1.3512

Canadian Dollar is back on defense into the monthly open with USD/CAD snapping a two-week losing streak off fresh yearly highs. The focus now shifts to major event risk on the horizon with the Fed interest rate decision later today and Non-Farm Payrolls on Friday likely to fuel volatility into the May opening-range. These are the updated targets and invalidation levels that matter on the USD/CAD short-term technical charts.

Review my latest Weekly Strategy Webinar for an in-depth breakdown of this Loonie setup and more. Join live on Monday’s at 8:30am EST.

Canadian Dollar Price Chart – USD/CAD Daily

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

Technical Outlook: In last month’s Canadian Dollar Short-term Outlook we noted that USD/CAD was trading, “just below resistance and immediate focus is on a possible test of uptrend support in the days ahead. From a trading standpoint, losses should be limited to 1.3447 for the January uptrend to remain viable with a close above 1.3623 needed to fuel the next leg higher.” USD/CAD plunged into uptrend support the following day with price briefly registering an intraday low at 1.3478 before rebounding sharply higher.

A rally of more than 2.7% exhausted into confluent resistance mid-month at 1.3848/81- a region defined by the 100% extension of the December rally, the 2023 high-day close (HDC), and the 2022 high-close. Price pulled back more than 1.5% off those highs with USD/CAD now sitting mid-range here into the May open- all eyes now shift to the Fed.

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 continuing to trade within the confines of an ascending channel formation extending off the December lows with price breaking above the median yesterday. Initial resistance is eyed at the 78.6% retracement of the recent decline at the 1.38-handle with a breach / close above 1.3848/81 ultimately needed to mark uptrend resumption towards the 2022 high / 2020 March weekly reversal close at 1.3977/90.

Weekly-open support rests at 1.3671 and is backed by a critical pivot zone at the December high-day close (HDC) / 61.8% Fibonacci retracement at 1.3599-1.3623- a break / close below this threshold would be needed to suggest a more significant reversal is underway towards the 200-day moving average (currently ~1.3548) and the 50% retracement at 1.3512.

Bottom line: The USD/CAD recovery is in focus heading into the May opening-range with major event risk on tap into the close of the week. From a trading standpoint, losses should be limited to the 1.36-handle with a breach / close above 1.3881 needed to mark resumption of the December uptrend. Note that the Fed rate decision is on tap later today with NFPs slated for releases Friday – stay nimble into the releases and watch the weekly close here for guidance. 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.

Active Short-term Technical Charts

• Euro Short-term Technical Outlook: EUR/USD Bear Market Rally Underway
• US Dollar Short-term Outlook: USD Bulls Rest Ahead of PCE, Fed
• British Pound Short-term Outlook: GBP/USD Bears Charge Support
• Australian Dollar Short-term Outlook: AUD/USD Plunges Post-CPI
• Gold Short-term Outlook: XAU/USD Bulls Attempt to Secure 2300

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

Follow Michael on X @MBForex