Canadian Dollar Technical Forecast: USD/CAD Major Support Test

Canadian Dollar Technical Forecast: USD/CAD Weekly Trade Levels

Canadian Dollar rallies for a fifth consecutive week– testing 200-day / 52-week moving averages
USD/CAD testing lower bounds of three-month range- breakout imminent
Resistance 1.3773, 1.3849/81 (key), 1.3990– Support 1.3566/90, 1.3511, 1.3432

The Canadian Dollar bulls have been in control for the past five-weeks with USD/CAD once again approaching the lower bounds of a multi-month range in price. While the near-term threat remains lower, the immediate focus is on possible inflection into technical support with the bears vulnerable while above this pivot zone. Battle lines drawn on the USD/CAD weekly technical chart.

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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 has been holding a well-defined range (1.3590-1.3773) for nearly two-months and the focus is on a breakout of this key zone in the weeks ahead.” That same range has now held for three-months with four-week sell-off poised to close just above support on Friday. Once again, we are looking for a reaction down here.

Weekly range support rests with the 52-week moving average / 38.2% retracement of the December rally at 1.3566/90 and is backed by the 2021 trendline (red) / 50% retracement near ~1.3511- losses should be limited to this threshold for the multi-year uptrend to remain viable in the weeks ahead. Broader bullish invalidation remains unchanged with the 61.8% Fibonacci retracement at 1.3432.

Range resistance steady at the yearly high-close at 1.3773 with key resistance steady at 1.3849/81 - a region defined by the 100% extension of the December rally and objective 2022 high-week close (HWC). A topside breach / weekly close above this threshold would be needed to mark resumption of the 2021 uptrend.

Bottom line: USD/CAD is 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 – rallies should be limited by the monthly open at 1.3678 IF price is heading lower on this stretch with a break / close below the yearly moving average needed to fuel a test of the 2021 uptrend. I’ll publish an updated Canadian Dollar Short-term Outlook once we get further clarity on 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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