Canadian Dollar Short-term Outlook: USD/CAD Rally Fizzles

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

• Canadian Dollar losses persist- USD/CAD testing confluent resistance this week
• USD/CAD rally may be vulnerable near-term- remains constructive above yearly open
• Resistance 1.3761/74, 1.3828, 1.3881– Support 1.3685, 1.3577, 1.3521/45

The Canadian Dollar losses continued to mount this week with USD/CAD rallying into confluent resistance at the yearly high-day close. While the broader outlook remains constructive, the advance may be vulnerable to a pullback here and we’re on the lookout for a possible exhaustion low within the broader July uptrend in the days ahead. These are the updated targets and invalidation levels that matter on the USD/CAD short-term technical charts heading into next week.

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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 USD/CAD had, “responded to uptrend resistance and threatens a larger correction in the days ahead. From a trading standpoint, the near-term risk remains weighted to the downside while below 1.3640– be on the lookout of an exhaustion low in the weeks ahead.” USD/CAD plunged more than 1.25% the following week before exhausting into uptrend support. A massive outside-reversal candle into the close of the month pivoted back above the yearly-open with price surging more than 3% off the September low.

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 testing resistance this week at the yearly high-day close / 88.6% Fibonacci retracement of the yearly range at 1.3761/74. A breach / close above this threshold is needed to mark resumption of the July uptrend with subsequent resistance objectives eyed at the yearly high-close at 1.3828 and the 2022 high-close at 1.3881- look for a larger reaction there IF reached.

Initial support rests with the September high-day close at 1.3685 backed closely by the median-line- losses below this slope would threaten a deeper washout towards the October open at 1.3577 and key support at 1.3521/45- a region defined by the 38.2% retracement of the July rally and the objective yearly open (broader bullish invalidation).

Bottom line: USD/CAD is testing confluent resistance here around the yearly high-day close and while the broader outlook remains constructive, the immediate advance may be vulnerable here near-term. Form at trading standpoint, be on the lookout for an exhaustion low ahead of 1.3545 in the days ahead with a breach / close above 1.3774 needed to fuel the next leg higher in price. 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

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