Canadian Dollar Forecast: USD/CAD Breaks Out Out of June Range

Canadian Dollar Technical Forecast: USD/CAD Weekly Trade Levels

USD/CAD breaks out of multi-week consolidation- attempts to mark five-day rally
USD/CAD surges into resistance at yearly downtrend - Fed, Core PCE, NFPs on tap
Resistance 1.3815/35 (key), ~1.39, 1.3974-1.4018– Support 1.3734, 1.3583, 1.3504/23 (key)

The Canadian Dollar is threatening a fifth daily decline against the US Dollar with USD/CAD surging more than 1.9% off the monthly low. A breakout of a multi-week consolidation pattern is now testing resistance at the yearly downtrend with the Federal Reserve interest rate decision imminent. Battle lines drawn on the USD/CAD weekly technical chart heading into August.

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Canadian Dollar Price Chart – USD/CAD Weekly

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

Technical Outlook: In my last Canadian Dollar Technical Forecast we noted that, “a rebound off the yearly channel is now approaching initial resistance at former support- looking for possible price inflection off the 1.3795-1.3835 zone into the monthly cross.” USD/CAD registered a high at 1.3798 that week before reversing sharply into a consolidation pattern that lasted for more than four-weeks. A breakout into the weekly open is now approaching this zone again ahead of major event risk into the monthly cross- risk for inflection ahead.

Immediate focus is on this week’s close with respect to 1.3815/35- a region defined by the 100% extension of the June advance, the 61.8% retracement of the May decline, and the broader 23.6% retracement of the yearly range. Note that the March trendline converges on this threshold over the next few weeks and a close above is needed to suggest a more significant low is in place / a larger trend reversal is underway. A topside breach exposes 2022 trendline (currently near ~1.39) with the next major technical consideration seen at 1.3974-1.4019.

Look for initial support at the yearly low-week close (LWC) at 1.3734 backed by the 2025 close-low at 1.3583. Critical support remains unchanged at the 1.618% extension / 78.6% retracement of the late 2023 rally at 1.3504/23- losses below this threshold would threaten another bout of accelerated losses towards 2024 LWC at 1.3360.

Bottom line: USD/CAD is now testing confluent resistance of a multi-month downtrend- Fed on tap. From a trading standpoint a good zone to reduce portions of long-exposure / raise protective stops. Losses should be limited to 1.3733 IF price is heading higher on this stretch with a close above the March trendline needed to fuel the next major leg of the advance.

Keep in mind the Fed interest rate decision is being released as this report is being published, and we still have key inflation data (Core PCE) tomorrow with Non-Farm Payrolls on tap into the monthly cross. Stay nimble into the releases and watch the weekly closes for guidance here. Review my latest Canadian Dollar Short-term Outlook for a closer look at the near-term USD/CAD technical trade levels.

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--- Written by Michael Boutros, Sr Technical Strategist

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