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

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

• Canadian Dollar pares December gains after USD/CAD breaks multi-week downtrend
• USD/CAD 2.7% rally off December low now testing first major resistance
• Resistance 1.3545,1.3608/23 (key), 1.3685 -Support 1.3448, 1.3400/06, 1.3290-1.3314

The Canadian Dollar is under pressure for a third consecutive week with a V-shaped recovery in USD/CAD taking price back towards the December open. The rally now faces the first major test of resistance, and the threat rises for possible near-term exhaustion / price inflection into this threshold. 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, “immediate focus is on a breakout of the December opening-range for further guidance. From a trading standpoint, rallies should be limited to 1.3749 IF price is heading lower on this stretch with a break / close below 1.3496 needed to fuel the next leg in price.” USD/CAD plunged lower four-days later with a break of the monthly range fueling a decline of more than 3.2% off the December high.  

A three-day test of support at the 88.6% retracement of the 2023 range at 1.3185 held into the close of the year with price vaulting into the January open. USD/CAD has almost recovered the entire December decline with price now approaching lateral resistance here at the 2023 objective yearly-open near 1.3545. Risk for topside 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 Canadian Dollar price action shows USD/CAD trading within the confines of an ascending channel formation extending off the yearly low. Note that the upper parallel further highlights resistance at 1.3545 and the focus is on a reaction off this mark.

Initial support rests with the 200-day moving average (currently ~1.3481) backed closely by the September low-day close (LDC) at 1.3448. Ultimately a break / close below the 61.8% retracement / weekly open at 1.3400/06 would be needed to invalidate the monthly uptrend with such a scenario exposing the February low-close / low-day close at 1.3290-1.3314.

A topside breach / close above the upper parallel could fuel another accelerated advance with the next major zone of resistance eyed at the 1.3608/22 Fibonacci confluence- look for a larger reaction there IF reached. Subsequent resistance objectives eyed at the September high-day close (HDC) at 1.3685 and 1.3745/49.

Bottom line: USD/CAD has now rallied more than 2.7% off the lows with a breakout of the late-November downtrend now testing initial resistance hurdles- looking for a reaction here. From a trading standpoint, a good zone to reduce portions of long-exposure / raise protective stops – losses should be limited to 1.3448 IF price is heading higher on this stretch with a close above the upper parallel needed to mark uptrend resumption. 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