Canadian Dollar short-term outlook: USD/CAD moment of truth at yearly support

Canadian Dollar technical outlook: USD/CAD short-term trade levels

• Canadian Dollar rally halted at key technical pivot zone near 2023 extremes
• USD/CAD carves weekly opening range just above major support zone
• Resistance 1.3407, 1.3450, 1.3533/45 (key)– support 1.3279-1.3314 (critical), 1.3225, 1.3076

The Canadian Dollar offensive was once again halted at critical support near the yearly lows in USD/CAD with this week’s opening-range taking shape just above. The battle-lines are drawn into the close of the week as the bulls attempt to build off this key pivotal zone. These are the updated targets and invalidation levels that matter on the USD/CAD short-term technical charts.

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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, “the USD/CAD sell-off has responded to key support around the yearly lows- the focus is on this near-term recovery within the monthly downtrend. From a trading standpoint, look for a break of the weekly opening-range for guidance with the bears vulnerable while above 1.3279.” Price rallied more than 2.7% off the lows to complete a full 61.8% retracement of the entire March decline. The subsequent sell-off takes USD/CAD back into critical support at 1.3279-1.3315- a region defined by the November low-day close and the 2023 yearly close-low / low-day close. Once again, the risk for infection / price exhaustion into this key zone.

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 reversing sharply off March downtrend resistance before rebounding off key support with the weekly opening-range taking shape just above. Initial resistance eyed at the April opening-range lows (1.3407) backed by the 38.2% retracement of the late-April decline / 200DMA at ~1.3450/54. Key resistance now stands with the 61.8% Fibonacci retracement / 2023 objective yearly open at 1.3533/45.

A break below this key support zone exposes the 38.2% retracement of the 2021 advance at 1.3225- a daily close below this threshold is needed validate a breakout of a multi-month consolidation formation / yearly opening-range with such a scenario threatening a more consequential correction towards the May 2022 swing high at 1.3076 and the 1.30-handle.

Bottom line: USD/CAD is once again testing key support near the yearly range-lows – risk for downside exhaustion / price inflection into this zone. From a trading standpoint, a good zone to reduce short-exposure / lower protective stops – the immediate focus is on a breakout of the weekly range for guidance. Ultimately, rallies should be limited to the yearly open for the monthly downtrend to remain viable. Review my latest Canadian Dollar weekly technical forecast for a look at the longer-term USD/CAD trade levels.

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