Canadian Dollar Short-term Outlook: USD/CAD Reverses From Resistance

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

• Canadian Dollar rallies nearly 1% against US Dollar on the heels of Powell testimony
• USD/CAD turns from technical resistance- now approaching multi-month trend support
• Resistance 1.3542/45, 1.3579, 1.3600/23 (key)- Support ~1.3460s, 1.3442, 1.3387

The Canadian Dollar is poised to mark a weekly advance for the second time this year with USD/CAD off nearly 1% from the highs. A reversal off technical resistance is now approaching the January uptrend and the focus is on possible price inflection just lower. 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 a breakout of the February opening-range in USD/CAD was, “approaching initial resistance hurdles. From a trading standpoint, look to reduce portions of long-exposure / raise protective stops on a stretch towards 1.3623 IF reached.” Price registered an intraday high at 1.3606 in to the close of the month with resistance holding into the March open. Yesterday’s Fed inspired sell-off in the US Dollar has gathered pace today with USD/CAD down by nearly 1% from the highs. The focus is on support at the January uptrend with the 200-day moving average now being tested.

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 an ascending pitchfork formation extending off the January 5^th low. Initial support rests with the lower parallel (currently ~ 1.3460s) and is backed closely by the 38.2% retracement of the late-December advance at 1.3442. A break / close below this threshold would threaten a larger price correction with such a scenario exposing the July high at 1.3387 and key support at 1.3314/41- a region defined by the February 2023 low-day close (LDC) and the 61.8% Fibonacci  retracement. Look for a larger reaction there IF reached.

Initial resistance is eyed at the January high / weekly opening-range low at 1.3542/45 and is backed by the objective monthly open at 1.3579. Key resistance now stands at the December high-day close / 61.8% retracement of the November decline around 1.3599-1.3623. A breach / daily close above this threshold is needed to mark uptrend resumption towards the 78.6% retracement / 2022 high-day close at 1.3744/49.

Bottom line: USD/CAD has turned from resistance with the pullback now approaching uptrend support. From a trading standpoint, look to reduce portions of short-exposure / lower protective stops on a stretch towards 1.3442- rallies should be limited to the monthly-open IF price is heading lower. Keep in mind we get the releases both US Non-Farm Payrolls and Canada Employment tomorrow with key inflation data on tap next week. I’ll publish an updated Canadian Dollar Weekly Technical Forecast once we get further clarity on 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