Canadian Dollar Short-term Outlook: USD/CAD Rally at Trend Resistance

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

• Canadian Dollar attempting to snap three-day losing streak (USD/CAD rally)
• USD/CAD weekly advance testing April downtrend resistance – risk for price inflection
• Resistance 1.37, 1.3748, 1.3778- Support 1.3590/99, 1.3571/73, 1.3512

USD/CAD rallied 0.8% off technical support at the monthly lows with the recovery now extending into resistance at the April downtrend. Battle lines drawn as the bulls try to recapture 1.37. These are the updated targets and invalidation levels that matter on the USD/CAD short-term technical charts heading into the close of the month.

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 my last Canadian Dollar Short-term Outlook we noted that the, “USD/CAD recovery is in focus heading into the May opening-range… 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.” Price reversed sharply lower the following day with USD/CAD registering an intraday low at 1.3590 before rebounding off support early this week.

The subsequent rally takes price back into channel resistance at the April downtrend near the 1.37-handle. The immediate focus is on a reaction into this threshold IF reached with a breach / close above the April channel needed to suggest a more significant reversal is underway.

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 rebounding off confluent support at 1.3590/99- a region defined by the 38.2% retracement at of the late-December rally and the December high-day close (HDC). Ultimately a break / close below the 100% extension of the decline / 200-day moving average at 1.3571/74 is needed to mark resumption of the April downtrend towards the lower parallels / 50% retracement at 1.3512.

A topside breach / close above the upper parallel here would suggest a more significant low was registered last week with subsequent resistance objectives eyed at the 61.8% Fibonacci retracement of the recent decline at 1.3748 and the May open at 1.3778- both areas of interest for possible price inflection IF reached.  Key resistance is now eyed at 1.3828/56- a region defined by the yearly HDC, the 100% extension of the December rally and the 2023 HDC.

Bottom line: The USD/CAD recovery is now testing multi-week downtrend resistance into the 1.37-handle- looking for a reaction here over the next 48-hours. From a trading standpoint, a good zone to reduce portions of long-exposure / raise protective stops – losses should be limited to the weekly open IF price is heading higher with a close above the monthly open needed to mark uptrend resumption.

Keep in mind we get key US inflation data (Core-PCE) next week into the close of the month- stay nimble into the cross and watch the weekly closes 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.

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

Follow Michael on X @MBForex