The Canadian Dollar is on the defensive with the recent US Dollar recovery taking USD/CAD within striking distance of multi-week downtrend resistance. These are the updated targets and invalidation levels that matter on the USD/CAD charts. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.
USD/CAD Price Chart – Daily
Technical Outlook: In my latest Canadian Dollar Price Outlook we noted that the advance was, “targeting confluence resistance at 1.3357/63– a region defined by the median-line of the descending pitchfork formation extending off the May highs, the 38.2% retracement of recent sell-off, the May swing low and near-term up-channel resistance.” A topside breach on Friday fueled a weekly close just below the 1.3435/37 pivot zone with trendline confluence just higher around ~1.3460s – we’re looking for possible exhaustion off one of these two zones.
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USD/CAD 120min Price Chart
Notes: A closer look at Loonie price action shows USDCAD holding within the confines of an descending pitchfork extending off the May highs and the risk remains weighted to the downside while within this formation. Interim support rests back at 1.3357/63 with a break below the median-line needed to mark resumption of the broader June decline targeting 1.3258 & 1.3175/98. A topside breach would keep the focus on subsequent resistance objectives at 1.3495 & 1.3537.
Bottom line: The USD/CAD recovery is now approaching technical resistance targets into 1.3460 and we’re looking for signs of exhaustion in this zone. From a trading standpoint, look to reduce long-exposure / raise protective stops on a move towards the upper parallels – we’ll be looking for a reaction there IF reached. Review my last Canadian Dollar Weekly Price Outlook for a longer-term technical picture on USD/CAD.
For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy
USD/CAD Trader Sentiment
- A summary of IG Client Sentiment shows traders are net-short USD/CAD – the ratio stands at -1.86 (35.0% of traders are long) –bullish reading
- Long positions are 13.4% higher than yesterday and 23.8% lower from last week
- Short positions are 26.9% higher than yesterday and 65.3% higher from last week
- We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USD/CAD prices may continue to rise. Traders are further net-short than yesterday & last week, and the combination of current positioning and recent changes gives us a stronger USD/CAD-bullish contrarian trading bias from a sentiment standpoint.
See how shifts in USD/ CAD retail positioning are impacting trend- Learn more about sentiment!
Relevant US / Canada Data Releases
Active Trade Setups
– Written by Michael Boutros, Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex