Canadian Dollar Forecast: USD/CAD Poised for May Breakout

Canadian Dollar Technical Forecast: USD/CAD Weekly Trade Levels

USD/CAD reversal off technical resistance now testing 2024 uptrend
Canadian Dollar coiling just above confluent support- range breakout pending
Resistance ~1.3749/55, 1.3849/81, 1.3990– Support 1.3623/53, 1.3507/11, 1.3432

The Canadian Dollar is on the defensive for a second consecutive week with USD/CAD rebounding off yearly uptrend support. The immediate focus is on a breakout of the May opening-range with the threat for a deeper correction remaining while below 1.3880. These are the updated targets and invalidation levels that matter on the USD/CAD weekly technical chart.

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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 USD/CAD had reversed confluent resistance with price, “now searching support within the yearly uptrend. From a trading standpoint, losses should be limited to 1.3623 IF price is heading higher on this stretch…” A decline of more than 1.4% off the April highs briefly registered an intraweek low at 1.3310 last week before rebounding with price exhausting today at the yearly high-week close (HWC) / 61.8% retracement of the recent decline near 1.3749/55.

Confluent weekly support rests at 1.3623/53- a region defined by the 61.8% Fibonacci retracement of the October decline and the objective 2023 high-week close (HWC). Note that basic channel support also converges on this threshold and further highlights its technical significance over the next few weeks. A break / close below would threaten a larger correction towards subsequent support objectives at the 52-week moving average / 50% retracement at 1.3507/11 and the 61.8% retracement of the December rally at 1.3432- both levels of interest for possible downside exhaustion / price inflection IF reached. Broader bullish invalidation remains with the objective 2021 upslope.

A topside breach / weekly close above 1.3755 would risk another test of key resistance at 1.3849/81- a region defined by the 100% extension of the December rally and objective 2022 high-week close (HWC). Note that basic trendline resistance extending off the 2022 highs also converges on this threshold over the next few months- look for a larger reaction there IF reached with a breakout needed to fuel the next major run towards the 2020 March reversal close at 1.3990 and the 1.618% extension / 2016 HWC at 1.4114/15.

Bottom line: A pullback from confluent resistance is now approaching uptrend support and the immediate focus is on a breakout of the 1.3623-1.3755 range for medium-term guidance here with the broader outlook still constructive while above 1.3432. From a trading standpoint, the risk remains for a deeper correction after the exhaustion high marked last month and we’re on the lookout for an exhaustion low in the weeks ahead with a close above 1.3881 needed to validate a larger breakout in price. 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 with FOREX.com

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