Canadian Dollar Short-term Outlook: USD/CAD Threatens July Uptrend

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

• Canadian Dollar bulls attempting to break multi-month trend
• USD/CAD threatening July uptrend support- risk for further losses sub-1.38
• Resistance 1.3749, 1.3799 (key), 1.3856/81– Support 1.3685, 1.3577/9 (key), 1.3545

The Canadian Dollar bulls are poised with USD/CAD pulling back into multi-month uptrend support on the heels of the recent US inflation read. The focus is on possible price inflection here today at confluent support as the fate of the July uptrend hangs in the balance. These are the updated targets and invalidation levels that matter on the USD/CAD short-term technical charts into the close of the 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 was testing resistance at fresh yearly highs into the October-close, “a good zone to reduce portions of long-exposure / raise protective stops- pullbacks should be limited to 1.3685 IF price is heading higher on this stretch with a close above 1.3881 needed to mark uptrend resumption.” A final, failed attempt to breach early in the month quickly reversed with USD/CAD collapsing nearly 2% off the highs.

The subsequent rebound off the July channel faltered last week at the yearly / monthly high-day close (1.3856) with the post-CPI plunge (outside-day reversal) again testing channel support today- watch the close.

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 multi-month channel support today with a modified, descending pitchfork off the highs giving some guidance to this decline. A break / close below the September high-day close at 1.3685 would threaten a larger correction towards 1.3577/91- a region defined by the objective October-open, the 100% extension off the monthly decline, and the 38.2% Fibonacci retracement of the July rally. Look for a larger reaction there IF reached with a close below this threshold needed to suggest a larger trend reversal is underway towards the yearly-open (1.3545) and the 200DMA near the 1.35-handle.

Initial resistance is eyed nearby at the median-line and is backed by the 2022 high-day close at 1.3746 with the near-term bearish invalidation set to the objective weekly open at 1.3799. Ultimately, a close / breach above key resistance at the yearly high-day close / 2022 high-close at 1.3856/88 is needed to mark uptrend resumption for the bulls.

Bottom line: USD/CAD is threatening a larger breakdown here at multi-month uptrend support. From a trading standpoint, rallies should be limited to 1.3799 IF price is heading lower with a break here exposing a possible run-on Fibonacci support just below 1.36- look for a larger reaction there IF reached. I’ll publish an updated Canadian Dollar Weekly Technical Forecast once we get further clarity on the longer-term USD/CAD trade levels.

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Economic Calendar - latest economic developments and upcoming event risk.

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Written by Michael Boutros, Sr Technical Strategist with FOREX.com

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