Canadian Dollar Short-term Outlook: USD/CAD Rally Rips to Resistance

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

• USD/CAD poised to mark a five-day rally- now approaching technical resistance
• Canadian Dollar threatening multi-month consolidation breakout- BoC rate decision, PCE on tap
• Resistance 1.3775/91, 1.3829/56 (key), 1.3899- Support 1.3707, 1.3678, 1.3590/99 (key)

The US Dollar is poised to mark a fifth consecutive daily advance against the Canadian Dollar with a breakout of the July opening-range now testing initial resistance hurdles. The focus is on possible price inflection up here with the immediate advance vulnerable while below this pivot zone. 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.

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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 note that USD/CAD had, “rebounded off multi-month trend support with the weekly & monthly opening-ranges preserved. From a trading standpoint, rallies should be limited to the upper parallel (blue) IF price is heading lower on this stretch with a break below the 200DMA ultimately needed to fuel the next leg.” Resistance held into the July-open with a test of confluent support at the 38.2% retracement / 200DMA / December high-day close (HDC) at 1.3591/99 on July 11^th sparking a substantial rebound USD/CAD.

The rallying has extended more than 1.3% off the monthly lows with a possible breakout of the multi-month consolidation pattern testing initial technical resistance here at 1.3775/91- a region defined by the 100% extension of the monthly advance and the 78.6% Fibonacci retracement of the April decline. Risk for possible exhaustion / price inflection into this threshold with the immediate long-bias vulnerable while below.

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 a proposed ascending pitchfork formation with the 75% parallel further highlighting resistance here at 1.3775/91. Initial support rests along the median-line and is backed by the objective weekly open at 1.3707. Near-term bullish invalidation now set to the June open at 1.3678.

A topside breach / close above this pivot zone is needed to fuel a breakout towards key technical resistance at 1.3829/56- a region defined by the 2024 high-day close (HDC), the 100% extension of the December rally, and the 2024 HDC. Look for a larger reaction there IF reached.

Bottom line: USD/CAD is threatening a breakout of a multi-month consolidation pattern with the rally now testing initial resistance hurdles. From a trading standpoint, losses should be limited to the monthly open IF price is heading higher on this stretch with a close above 1.3791 needed to fuel the next leg in price.

Keep in mind we get the release of the Bank of Canada (BoC) interest rate decision tomorrow with consensus estimates calling for a 25bps cut to 4.50%. Event risk carries over in the end of the week with US Core Personal Consumption (PCE- the Fed’s preferred inflationary gauge) on tap Friday. Stay nimble into the releases and watch the weekly close for guidance 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