Canadian Dollar Short-term Outlook: USD/CAD Set to Snap 2023

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

• Canadian Dollar under pressure for a fourth consecutive week
• USD/CAD rally now approaching confluent resistance into yearly open
• Resistance 1.3545/68 (key), 1.3647, 1.3761– support 1.3386, 1.3290-1.3314, 1.3218

The Canadian Dollar is poised for a fourth consecutive weekly decline with the USD/CAD rally nearly erasing the yearly losses. The focus now shifts to possible exhaustion / price inflection as the advance approaches key resistance around the objective 2023 yearly open. 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 highlighted a critical support zone at 1.3076-1.3110- a region defined by the 100% extension of the October decline and the May 22’ swing high. USD/CAD briefly registered an intraday low at 1.3092 in the following days before rebounding sharply with an outside-day reversal off the lows leading an advance of more than 3.1%. Is a more significant low now in place?

The advance is attempting to break through confluence resistance today at the 50% retracement of the yearly range near 1.3477- looking for possible inflection here with key resistance eyed just higher at the objective yearly open / 61.8% Fibonacci retracement of the yearly range at 1.3545/68.

Canadian Dollar Price Chart – USD/CAD 240min

Chart Prepared by Michael Boutros, Sr. Technical Strategist; USD/CAD on TradingView

Notes: A closer look at Loonie price action shows USD/CAD trading within the confines of an ascending pitchfork formation extending off the June / August lows with the 75% parallel further highlighting this threshold near 1.3477- watch today’s close.

Initial support rests at 1.3386 and is backed by the February low-day close / low at 1.3290-1.3314. Losses should be limited to this threshold IF USD/CAD is heading higher on this stretch (near-term bullish invalidation). Ultimately, a break / close below the objective low-day close at 1.3218 would be needed to mark resumption of the March downtrend.

A topside breach / close above this formation would be needed to suggest a more significant low was registered last month with the next major resistance objective eyed at the March open pivot-zone at 1.3647- look for a larger reaction there IF reached.

Bottom line: USD/CAD has posted an impressive four-week rally into confluent resistance and while the medium-term outlook remains constructive, the immediate advance may be vulnerable into these levels. From at trading standpoint, look to reduce long-positioning / rase protective stops on a stretch towards the yearly open. Pullbacks should be limited to the 1.33-handle for the long-bias to remain viable with a breach above 1.3568 needed to fuel the next leg higher. 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

Follow Michael on Twitter @MBForex