Canadian Dollar Technical Forecast: USD/CAD Bulls Charge Resistance

Canadian Dollar Technical Forecast: USD/CAD Weekly Trade Levels

• Canadian Dollar marks third weekly plunge against US Dollar- USD/CAD rallies 1.87%
• USD/CAD monthly opening-range taking shape below technical resistance at yearly high
• Resistance 1.3849/81 (key), 1.3990-1.40, 1.4115– Support 1.3773, 1.3596-1.3617, ~1.35

The Canadian Dollar has been under assault for the past three-weeks with USD/CAD ripping to key technical resistance at fresh 2024 highs. While the broader outlook remains constructive, immediate advance may be vulnerable here as price attempts to breakout of a multi-year consolidation pattern. Battle lines drawn on the USD/CAD weekly technical charts heading into the August opening-range.

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Canadian Dollar Price Chart – USD/CAD Weekly   

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

Technical Outlook: In last month’s Canadian Dollar Technical Forecast we noted that USD/CAD was, “testing the lower bounds of a three-month range and we’re looking for possible exhaustion / price inflection in the weeks ahead. From a trading standpoint, a good zone to reduce short-exposure / lower protective stops.” Price turned sharply higher the following week with a three-week rally taking USD/CAD into technical resistance at fresh yearly highs (rally of 2.2% from the July lows)- price is exhausting into this level today post-NFP and we’re looking for a reaction here with the multi-week rally vulnerable while below this week’s high.  

Key weekly resistance remains at 1.3849/81 - a region defined by the 100% extension of the December rally and objective 2022 high-week close (HWC). Note that basic trendline resistance extending off the 2022 highs also converges on this threshold over the next few weeks and a breach / close above will be needed to validate a larger technical breakout / mark resumption of the broader 2021 uptrend. Subsequent resistance objectives eyed at the 2020 March reversal close / 61.8% extension at 1.3990-1.40 and the 2016 high-week close (HWC) at 1.4115.

Initial weekly support now rests with the April high-close near 1.3773 and is backed by the 52-week moving average / 38.2% Fibonacci retracement of the December rally at 1.3596-1.3617. Broader bullish invalidation is seen along the 2021 trendline, currently near the 1.35-handle.

Bottom line: USD/CAD has rallied into technical resistance at fresh yearly highs – risk for possible exhaustion / price inflection off this mark. From a trading standpoint, a good zone to reduce portions of long-exposure / raise protective stops- losses would need to be limited to 1.3773 IF price is heading higher on this stretch with a close above 1.3880 needed to fuel the next major leg. Ultimately, a larger pullback off these levels may offer more favorable opportunities closer to trend support.

Keep in mind price is just now carving the August opening-range just below key resistance and we’ll be looking for a breakout in the weeks ahead for further guidance here- watch the weekly closes. Review my latest Canadian Dollar Short-term Outlook for a closer look at the near-term USD/CAD technical trade levels.

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

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