Canadian Dollar Outlook: USD/CAD Threatens Reversal Post-FOMC

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

USD/CAD rebounds sharply off support at monthly lows in the wake of the Fed and BoC rate decisions
Focus is on whether this move marks resumption of the broader uptrend or a short-lived bounce into the monthly close.
Resistance 1.3978, 1.4007/16, 1.4045 (key) - Support 1.3881/99 (key), 1.3832, 1.3727/46

The Canadian Dollar is on the back foot, with USD/CAD reversing sharply off the monthly lows after defending key support in the aftermath of the FOMC and BoC rate decisions. The rebound keeps the July uptrend intact, and the attention now turns to whether this recovery can gain traction into the close of the month. Traders are also watching tomorrow’s U.S. Q3 GDP release and headlines out of Aisa as President Trump and Xi meet to discuss the ongoing trade dispute. Volatility is likely to remain elevated in the near-term and the battlelines are drawn on the USD/CAD 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 my last Canadian Dollar Short-term Outlook, we noted that USD/CAD, “From a trading standpoint, losses should be limited to the 200-day moving average IF price is heading higher on this stretch with a close above 1.41 needed to fuel the next major leg of the advance.” Price broke below the 200-day moving average yesterday with USD/CAD rebounding off key support today on the heels of the FOMC interest rate decision as markets lowered the probability of a December rate cut. A reversal off the monthly lows keeps the focus on a break above the median-line to reassert the long-bias with the weekly / monthly close critical here.

Canadian Dollar Price Chart – USD/CAD 240min

Chart Prepared by Michael Boutros, Sr. Technical Strategist; USD/CAD on TradingView

Notes: A closer look at Canadian Dollar price action shows USD/CAD rebounding off key support at the 2022 high-close / 2023 high at 1.3881/99. The bulls are now attempting to retake the 200DMA with resistance seen at the 2022 high at 1.3978 and 1.4007/16- a region defined by the 61.8% retracement of the recent decline, the weekly opening-range high, and the May swing high. A breach / daily close above the October high-day close (HDC) at 1.4046 is ultimately needed to suggest a more significant low was registered today / mark uptrend resumption. Subsequent resistance eyed at the monthly high at 1.4080 ad 1.4167/78.

A break below the 1.3881 pivot zone would threaten a test of the lower parallel with a close below the September 11 reversal close at 1.3832 needed to invalidate the June uptrend / suggest a larger trend reversal is underway. Losses below this threshold would threaten another bout of accelerated losses with the next major technical consideration seen at 1.3727/46- a region defined by the September low, the 38.2% retracement of the 2021 advance, and the 61.8% retracement of the June advance. Look for a larger reaction there IF reached.

Bottom line: The USD/CAD defended key support today at the monthly range lows and threatens a larger recovery- the immediate focus is on the 200-day moving average. From a trading standpoint, losses would need to be limited to today’s low IF price is heading higher on this stretch with a close above 1.4045 needed to fuel the next major leg of the advance.

Keep in mind we get the release of U.S. Q3 GDP data tomorrow, as well as an updated on the Trump / Xi meeting in South Korea. Stay nimble here and watch the weekly / monthly close for guidance. Review my latest Canadian Dollar Weekly Forecast for a closer look at the longer-term USD/CAD technical trade levels.

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Written by Michael Boutros, Sr Technical Strategist

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