Canadian Dollar Short-term Outlook: USD/CAD Grinds at Resistance into Q3

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

• Canadian Dollar under pressure for a second week
• USD/CAD rebound off downtrend support now testing key pivot zone
• Resistance 1.3279-1.3315 (key), 1.3401/05, 1.3449– support 1.3184, 1.3279-1.3314 (critical), 1.2992

The Canadian Dollar is poised for a second weekly decline with the USD/CAD rebound now testing a critical pivot zone into the monthly open. Major event risk is on tap into the close of the week and the battle lines are drawn heading into July trade. These are the updated targets and invalidation levels that matter on the USD/CAD short-term technical charts.

Review my latest Weekly Strategy Webinar for an in-depth breakdown of this Loonie setup and more. Join live on Monday’s at 8:30am EST.

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 is once again testing a critical support zone near the yearly range-lows,” at 1.3279-1.3315- a region defined by the November low-day close and the 2023 yearly close-low / low-day close. A break on June 15^th fueled a decline of more than 1.2% before rebounding just ahead of confluent support near the 100% extension of the 2022 decline at 1.3110.

That rally is now testing former support as resistance into the start of the month / quarter with the median-line (red) further highlighting the technical significance of this threshold over the next few days.

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 a short-term ascending channel off last month’s low with the weekly opening-range set just below key resistance here at 1.3279-1.3315.

Initial lateral support rests at the 61.8% Fibonacci retracement of the rebound at 1.3184 with critical support steady at 1.3076-1.3110- a break / daily close below this threshold is needed to mark resumption of the broader downtrend towards 1.2992 and the next major technical hurdle at the 2021 high-day close / 2019 low at 1.2940/51. Note that a break of downtrend support could fuel another bout of accelerated losses– use caution here.

A topside breach / close above the 1.3279-1.3315 pivot zone would threaten a larger recovery towards the 38.2% retracement of the yearly range at 1.3401/05 and the 61.8% retracement of the late-May decline at 1.3449 – both levels of interest for possible exhaustion / price inflection IF reached.

Bottom line: USD/CAD posted an outside-weekly reversal off fresh yearly lows last week with the recovery now testing a key pivot zone around the yearly opening-range lows- looking for possible inflection into this zone early in the month. From a trading standpoint, a good zone to reduce long-exposure / raise protective stops- losses should be limited to 1.3184 IF price is heading higher on this stretch with a close above 1.3315 needed to fuel a larger recovery.

Keep in mind that we are just beginning to carve out the monthly opening-range- stay nimble into Friday with the release of US Non-Farm Payrolls and Canada Employment likely to fuel added volatility. Review my latest Canadian Dollar Weekly Technical Forecast for a look at the longer-term USD/CAD trade levels.

Key USD/CAD Economic Data Releases

Economic Calendar - latest economic developments and upcoming event risk.

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

Follow Michael on Twitter @MBForex