Canadian Dollar Short-term Outlook: USD/CAD Plunge Halted at Support

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

• Canadian Dollar rally halted again at key technical pivot zone near 2023 extremes
• USD/CAD bears vulnerable into multi-month consolidation pattern
• Resistance 1.3405, 1.3450, 1.3527/45 (key)– support 1.3279-1.3314 (critical), 1.3225, 1.3076

The Canadian Dollar plunged back towards critical support with a two-week sell-off once again taking USD/CAD back into a key pivot around the yearly lows. The bears are on notice ahead of major event risk over the next few weeks. These are the updated targets and invalidation levels that matter on the USD/CAD short-term technical charts.

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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 last month’s Canadian Dollar short-term outlook we noted that the recent, “sell-off takes USD/CAD back into critical support at 1.3279-1.3315- a region defined by the November low-day close and the 2023 yearly close-low / low-day close. Once again, the risk for inflection / price exhaustion into this key zone.” USD/CAD rallied more than 2.5% off those lows with before turning from Fibonacci resistance at 1.3647 (high registered at 1.3654). A two-week plunge off those levels takes price back into critical support for the fourth-time in five-months. Once again, risk for downside exhaustion / price inflection into this threshold.

Canadian Dollar Price Chart – USD/CAD 240min

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

Notes: A closer look at Loonie price action shows USD/CAD trading within a near-term descending channel formation with price turning just ahead of key support yesterday. Initial resistance stands with eh April opening-range lows near 1.3405 backed closely by the 38.2% retracement of the recent decline around 1.3450- a breach / close above this threshold would threaten a larger recovery within the broader consolation pattern towards key resistance at the 61.8% retracement / yearly open at 1.3527/45. Look for a larger reaction there IF reached.

A break / close below this key support zone would be needed to validate a breakout of the larger multi-month consolidation pattern with such a scenario threatening a much steeper decline towards initial objectives at 1.3225 and the May 2022 highs at 1.3076.

Bottom line: USD/CAD is once again testing a critical support zone near the yearly range-lows – risk for downside exhaustion / price inflection into this zone. From a trading standpoint, a good zone to reduce short-exposure / lower protective stops. Ultimately, the broader focus remains on a breakout of the 1.3279-1.3545 range for guidance here. Keep in mind we have Canada employment data on tap tomorrow with US CPI and the FOMC rate decision looming next week- stay nimble here. Review my latest Canadian Dollar weekly technical forecast for a look at the longer-term USD/CAD trade levels.

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

Follow Michael on Twitter @MBForex