USD / CAD Rips on Fed-Loonie Breakout Levels

Canadian Dollar Price Technical Outlook: USD / CAD Weekly Trade Levels

• Canadian dollarUpdated Technical Trade Levels – Weekly Chart
• USD / CAD technical support rebound fueled afterFOMC – downside resistance in sight
• Critical support 1.2048- Resistance 1.2444, Key resistance 1.2579-1.2635

the Canadian dollar fell by more than 2.4% compared to US dollar this week with USD / CAD now up nearly 4% from multi-year lows recorded at the June trade opening. The Fed-induced USD rally fueled a reversal of key support that we have been tracking for weeks now, with the lead now targeting multi-month downside resistance – this is the first test of whether the rally USD / CAD is just a short term recovery or a larger trend reversal. It is the updated targets and invalidation levels that rely on the USD/GOUJAT weekly technical price tables. See again my last Strategy webinar for an in-depth analysis of this technical loonie configuration and more.

Canadian Dollar Price Chart – Weekly USD / CAD

Graphic prepared by Michel Boutros, technical strategist; USD / CAD on Tradingview

Notes:In my last Canadian dollar Weekly Price Outlook We noted that a “rebound from downtrend support is vulnerable ahead of major event risk this week with the FOMC decision on interest rates and core inflation in Canada. From a trading perspective, be on the lookout for reaction on the upper parallel stretch – losses should be limited to the monthly open at 1.2058 IF the price is indeed on the upside with a breach above 1.2365 ultimately needed to suggest that a larger trend reversal is underway. USD / CAD surged higher after the FOMC, with the rally exceeding the 1.2365 threshold Friday.

Initial weekly rresistance now sits at the November trendline / 50% retracement of the annual range to 1.2444. A weekly breach / close above would be required to keep the immediate long bias viable towards resistance targets after the 2018 annual open / 23.6% Fibonacci retracement of the decline from 2020 to 1.2579-1.2635– look for a stronger reaction if it is reached. Initial Support now rests at 2018 lowest swing at 1.2247 with a break below 1.2061 / 48 still needed to mark the resumption of the broader downtrend towards the 2007 high / May 2015 low to 1.1879-1.1919.

At the end of the line : The USD / CAD rebound on the downtrend support is now testing the resistance to the downtrend over several months, looking for an upside reaction here. From a trading perspective, a good area to reduce long exposures / increase protective stops – losses should be limited to 1.2247 IF the price is indeed heading higher with a break / close above 1.2634 ultimately needed to suggest that a larger low is in place. Review my last Canadian dollar Price outlookfor a closer look at short-term USD / CAD technical trading levels.

For a full description of Michael’s trading strategy, see his Fundamentals of Technical Analysis Series on Bbuild a Tranking Sstrategy

Canadian Dollar Trader Sentiment – USD / CAD Price Chart

• A summary of Sentiment of IG customers shows traders are long on USD / CAD – the ratio stands at +1.90 (65.50% of traders are long) – usually bearish reading
• Long positions are13.22% less than yesterday and 34.03% less than last week
• Short positions are 7.80% more than yesterday and 32.60% more than last week
• We generally take a contrarian view of crowd sentiment, and the fact that traders are net long suggests that USD / CAD prices may continue to decline. However, traders are shorter than yesterday and compared to last week. Recent changes in feeling warn that the current USD / CAD price trend may soon reverse to the upside despite traders staying net long.

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— Written by Michel Boutros, Technical currency strategist with DailyFX

To pursue Michael on Twitter @MBForex

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