Canadian Dollar Short-term Outlook: USD/CAD Trump Rally Unravels
The Trump rally failed at technical resistance last week with a two-day plunge testing the first line of defense. Battle lines drawn on the USD/CAD short-term charts.
Share this:
Canadian Dollar Technical Outlook: USD/CAD Short-term Trade Levels
- USD/CAD Trump rally falters into technical resistance- down nearly 1% off multi-year high
- USD/CAD now testing initial support- risk for price inflection / larger correction
- Resistance 1.4085/89 (key), 1.4189-1.42, 1.4310- Support 1.3978/90, 1.3935, 1.3881/99 (key), 1.3825
The US Dollar has been on the defensive since the start of the week with USD/CAD down nearly 1% from the post-election highs. The decline takes price into the first line of defense for the bulls and a break below could fuel a larger correction within the broader uptrend. We’re looking for a possible inflection off this key range in the days ahead. Battle lines drawn on the USD/CAD short-term technical charts.
Review my latest Weekly Strategy Webinar for an in-depth breakdown of this Loonie setup and more. Join live on Monday’s at 8:30am EST.
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 was trading just below major resistance near 1.3978/90 on the heels of the US election and that the, “focus is on a breakout of the weekly opening-range- losses should be limited to the median-line IF USD/CAD is heading higher on this stretch with a close above the upper parallel needed to fuel the next major leg in price.”
USD/CAD held that range for nearly five days before finally breaking higher with a 2% rally off the monthly low exhausting last week at the 78.6% retracement of the 2020 decline at 1.4085. The bears are attempting to break back below that same pivot zone today at 1.3978/90- a region defined by the 2022 high and the 2020 March weekly-reversal close. Note that the 75% parallel converges on this zone today and a close below could threaten a larger pullback / suggest a that a mor significant near-term high was registered last week.
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 the USD/CAD continuing to trade within the confines of the ascending pitchfork we’ve been tracking off the September/October low. Note that a breach of the upper parallel last week failed at the 1.382% slope extension and keeps this formation in focus for now.
A break / close below this key pivot zone would expose the median / 100% extension around 1.3935 and the 2022 high-close / 2023 high at 1.3881/99- both areas of interest for possible downside exhaustion / price inflection IF reached. Broader bullish invalidation now raised to the August high-day close (HDC) at 1.3825. Losses below this threshold would suggest a larger trend reversal is underway.
A topside breach / daily close above the 78.6% retracement / weekly open at 1.4085/89 is needed to signal uptrend resumption. Subsequent resistance objectives at the 100% extension of the December advance at 1.4189-1.42 and the 61.8% extension of the broader 2021 advance at 1.4310.
Bottom line: A breakout of the monthly opening range is now testing initial support- looking for a reaction here. From a trading standpoint, a good zone to reduce portions of short-exposure / lower protective stops- rallies should be limited to the upper parallel (1.4060s) IF price is heading lower on this stretch with a close below 1.3978 needed to fuel the next leg lower.
Ultimately, losses would need to be limited to 1.3881 for the September uptrend to remain viable with a close above 1.4089 needed to mark uptrend resumption. Watch the weekly close here for guidance. Review my latest Canadian Dollar Weekly Technical Forecast for a closer look at the longer-term USD/CAD trade levels.
Key USD/CAD Economic Data Releases
Economic Calendar - latest economic developments and upcoming event risk.
Active Short-term Technical Charts
- Japanese Yen Short-term Outlook: USD/JPY Bears Charge Uptrend Support
- Swiss Franc Short-term Outlook: USD/CHF Bulls Relent at Resistance
- British Pound Short-term Outlook: GBP/USD in Freefall- Support Ahead
- Euro Short-term Outlook: EUR/USD Breakdown Searches for Support
- US Dollar Short-term Outlook: USD Trump Bump Extends into Resistance
- Australian Dollar Short-term Outlook: AUD/USD Bears Go for the Break
- Gold Short-term Outlook: XAU/USD Plunges on Trump Victory- Fed on Tap
Written by Michael Boutros, Sr Technical Strategist
Follow Michael on X @MBForex
Open an account in minutes
Experience award-winning platforms with fast and secure execution, and enjoy tight spreads from 0.5 pts on FX and 0.3 pts on indices.
Economic calendar
Web Trader platform
Our sophisticated web-based platform is packed with features.
Related articles
USD/JPY weekly outlook: Quarter turn scrambles rates regime
USD/JPY’s tight relationship with front-end US rates broke down sharply last week, but quarter-turn flows and positioning suggest the disconnect may prove temporary.
USD/CAD forecast: rally could accelerate above June highs at 1.4250
USD/CAD recovered quickly after weaker US jobs data, keeping the bullish trend in focus. A move above the June highs could accelerate the rally as inflation keeps the Fed under pressure.
Dow Jones Slide Shows What Rate Hike Bets Mean for Stocks
The Dow Jones support breakdown shows rising bond yields and rate hike bets hitting U.S. stocks while tech giants prop up the Nasdaq.
This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.
StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.
In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.
StoneX Financial Pte. Ltd. is not under any obligation to update this report.
Trading CFDs carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.forex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.