Canadian Dollar Short-term Outlook: USD/CAD Hits Uptrend Resistance
Canadian Dollar Technical Outlook: USD/CAD Short-term Trade Levels
- USD/CAD breaks out of February downtrend on six-day advance– fails at resistance post-NFP
- USD/CAD threatens outside-day reversal- risk for further weakness into start of August
- Resistance 1.3881/99 (key), 1.3928, 1.3978- Support 1.3729/50, 1.3670 (key), 1.3571/90
The U.S. Dollar plunged today on the heels of a disappointing jobs report today with USD/CAD reversing sharply from technical resistance. A breakout of a multi-month downtrend is being tested into the August-open and the focus is on this pullback into the monthly opening-range. Battle lines drawn 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 USD/CAD was testing, “resistance at 1.3729/50- a region defined by the 38.2% retracement of the 2021 rally and the May opening-range lows. Note that pitchfork resistance converges on this threshold over the next few days and further highlights the technical significance of this key zone- looking for a reaction off this mark this week.” USD/CAD reversed sharply off resistance in the following days with price plunging more than 1.4% off the monthly high. Last week’s rebound broke out of the February downtrend with the recent Fed-induced rally taking price into resistance in early US trade at the 2022 high-close / 2023 swing high at 1.3881/99.
Today’s post-NFP sell-off is poised to mark an outside-day reversal off fresh multi-week highs and while last month’s breakout does threaten a larger USD/CAD recovery, the advance may be vulnerable into the August open. The focus now shifts to the August opening-range which is taking shape just below confluent resistance.
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 trading within the confines an ascending pitchfork extending off the July low with today’s pullback finding support at the median-line. Initial support rests at 1.3729/50 and is backed by the 61.8% retracement of the June advance at 1.3670. Note that the lower parallel converges on this threshold into the start of the month and a close below this slope would be needed to suggest a more significant high is in place / a larger reversal is underway. Ultimately, a close below the yearly low-day close (LDC) / May, Junee, and July lows at 1.3571/90 is needed to mark resumption of the broader downtrend.
A topside breach above the 1.39-handle is needed fuel the next leg of the advance with subsequent resistance objectives eyed at the 1.618% extension of the July advance at 1.3928 and the 2022 high at 1.3978. The next major technical consideration is eyed at the May high / 38.2% retracement of the yearly range / 200DMA at ~1.4016/41- look for a larger reaction there IF reached.
Bottom line: The USD/CAD breakout is being tested into the August open. From a trading standpoint, losses would need to be limited to 1.3670 IF price is heading higher on this with a close above 1.39 needed to mark uptrend resumption.
Keep in mind we are in the early throws of the monthly opening-range with the U.S. tariffs set to take effect and key Canadian employment data on tap next Friday. Watch the weekly closes here for guidance. Review my latest Canadian Dollar Weekly Forecast for a closer look at the longer-term USD/CAD technical trade levels.
Key USD/CAD Economic Data Releases
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Written by Michael Boutros, Sr Technical Strategist
Follow Michael on X @MBForex
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