USD/CAD Virus Breakout may be Overdone

Canadian Dollar Technical Price Outlook: Near-term Trade Levels

• Canadian Dollar updated technical trade levels – Daily & Intraday Charts
• USD/CAD 2020 rally testing multi-year uptrend resistance
• Rally vulnerable near-term- trade remains constructive while above 1.4014.

The Canadian Dollar remains on the defensive against the US Dollar early in the week but takes USD/CAD into a key technical resistance zone we’ve been tracking for some time. While the broader outlook remains weighted to the topside, the immediate advance may be vulnerable IF price is unable to mount a close above this threshold. These are the updated targets and invalidation levels that matter on the USD/CAD price charts heading into Jobs Friday. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this Loonie trade setup and more.

Canadian Dollar Price Chart – USD/CAD Daily

Chart Prepared by Michael Boutros, Technical Strategist; USD/CAD on Tradingview

Technical Outlook: In my last Canadian Dollar Price Outlook we noted that USD/CAD was testing, “uptrend resistance (risk for near-term exhaustion) with a breach / weekly close above 1.4565 needed to fuel the next leg higher in price.” Price briefly registered a high at 1.4667 last week but failed to mark a daily close above confluence resistance at the 61.8% parallel (blue) / 2016 high-close / 100% ext at 1.4534/65. Note that daily RSI is deep in overbought territory and while momentum is on the side of the bulls, the price advance may be vulnerable near-term while below this threshold.

Canadian Dollar Price Chart – USD/CAD 120min

Notes: A closer look at Loonie price action shows USD/CAD failing last week on building divergence into the highs before pulling back. Price is once again testing this resistance zone into the start of the week- look for a reaction here. A close above exposes the 2016 high at 1.4690 backed by the upper parallel of the ascending pitchfork formation extending off the 2016/2017 lows, currently around 1.4930s.

Weekly open support rests at 1.4352 backed by the 2016 high-week close at 1.4115. Ultimately a break / close below the 38.2% retracement at 1.4014 would be needed to suggest a larger correction is underway with such a scenario exposing 1.3793-1.3812 and the 61.8% retracement / 20178 high-day close at 1.3610/47 – both areas of interest for possible downside exhaustion IF reached.

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Bottom line: The USD/CAD rally is testing lateral resistance here at 1.4534/65 and the immediate advance may be vulnerable IF price holds this threshold into the close. Form a trading standpoint, a good spot to reduce long-exposure / raise protective stops. The weekly opening-rangeis taking shape just below resistance – look to the break for guidance here. Ultimately, a larger pullback may offer more favorable entries with a breach higher exposing longer-term slope resistance above the 1.49-handle. Review my latest Canadian Dollar Weekly Price Outlook for a closer look at the longer-term USD/CAD technical trade levels.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

Canadian Dollar Trader Sentiment – USD/CAD Price Chart

• A summary of IG Client Sentiment shows traders are net-short USD/CAD – the ratio stands at –2.69 (27.06% of traders are long) – bullish reading
• Long positions are42.74% higher than yesterday and 22.92% higher from last week
• Short positions are29.27% higher than yesterday and 3.02% 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. Yet traders are less net-short than yesterday and compared with last week and the recent changes in sentiment warn that the current USD/CAD price trend may soon reverse lower, despite the fact traders remain net-short.

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Key US / Canada Data Releases

Economic Calendar – latest economic developments and upcoming event risk.

Active Trade Setups

– Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex