Canadian Dollar Technical Forecast: USD/CAD Rally Eyes First Test

Canadian Dollar Technical Forecast: USD/CAD Weekly Trade Levels

Canadian Dollar pares December gains- USD/CAD rallies nearly 1.25% into yearly open
USD/CAD rebound off multi-year trend support approaching initial resistance
Resistance 1.3453, 1.3489, 1.3545– Support 1.3218/25, 1.3100, 1.3000

The Canadian Dollar has been on defense since the start of the year with USD/CAD rallying more than 1.8% off the December lows. A rebound off multi-year trend support is now approaching multi-month downtrend resistance and the focus is on a possible price inflection just higher. These are the updated targets and invalidation levels that matter 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 had broken below a multi-month uptrend with key support eyed at, “a major slope confluence at 1.3218/65- a region defined by the yearly low-week close, 38.2% retracement of the 2021 advance, and the 78.6% retracement. Look for a larger reaction there IF reached.” USD/CAD plunged into the close of 2023 with price briefly registering an intra-week low at 1.3177 before rebounding sharply into the January open.

The immediate focus is on this recovery off confluent support with initial weekly resistance eyed at the 38.2% Fibonacci retracement of the October decline at 1.3453 and the 52-week moving average (currently ~1.3489). Bearish invalidation now lowered to the 2023 yearly open at 1.3545 with a beach / close above 1.3623/40 ultimately needed to mark uptrend resumption.

Key support now tightened to the 2023 low-week close (LWC) / 38.2% retracement at 1.3218/25- a break / close below this threshold would invalidate the 2021 uptrend and threaten a more significant decline towards last year’s low around the 1.31 and the psychological 1.30-handle (look for a larger reaction there IF reached).

Bottom line: USD/CAD has rebounded off confluent uptrend support with the immediate focus on this recovery. From a trading standpoint, look to reduce long-exposure / raise protective stops on a stretch towards the October trendline – risk for an exhaustion high into 1.3545. Losses should be limited to 1.3218 IF the 2021 uptrend is to remain viable with a close above 1.3640 needed to fuel the next leg higher in price. 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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