Canadian Dollar Short-term Outlook: USD/CAD Battle Lines Drawn

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

Canadian Dollar down more than 2.2% against the US Dollar since the start of 2024
USD/CAD attempts breakout of January / February range highs- initial resistance in view
Resistance 1.3584,1.3623 (key), 1.3723/49- Support 1.3542, 1.3478, 1.3413/34 (key)

The Canadian Dollar is on the defensive against the US Dollar again this week with USD/CAD breaking to fresh monthly highs yesterday to mark the largest single-day advance since May 11. The rally is now approaching initial resistance hurdles and the risk rises for possible near-term exhaustion / price inflection into these levels. These are the updated targets and invalidation levels that matter 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 had, “rallied more than 2.7% off the lows with a breakout of the late-November downtrend now testing initial resistance hurdles- looking for a reaction here.” Price plunged nearly 1.4% in the following days with a short-stint below the 1.34-handle breaking higher into the February open.

USD/CAD has now rallied more than 3% off the December lows with price breaching the January range highs (also the February opening-range high) yesterday. Initial resistance objectives are already in view and while the broader outlook remains constructive, the immediate advance may be vulnerable into technical resistance in the days ahead.

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 of an ascending channel formation extending off the January 5^th low. Initial support rests at 1.3542 backed by the 200-day moving average (currently ~1.3479) and last week’s low / the February open at 1.3413/35. We’ll reserve this threshold has our near-term bullish invalidation level- losses below this pivot zone would threaten a larger setback towards key support back at the February low / low-day close (LDC) at 1.3290-1.3314.

Initial resistance is eyed with the 61.8% extension of the late-December advance at 1.3584 and is backed closely by the highlighted technical confluence around the 61.8% Fibonacci retracement of the November decline at 1.3623- look for a larger reaction there IF reached with a breach / daily close above needed to fuel the next leg higher in price towards 1.3723/49.

Bottom line: USD/CAD is attempting to build on a breakout of the monthly opening-range with the advance now approaching initial resistance hurdles. From a trading standpoint, look to reduce portions of long-exposure / raise protective stops on a stretch towards 1.3623 IF reached – losses should be limited to the monthly-open with a breach above channel resistance needed to mark resumption of the December uptrend. 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

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Active Short-term Technical Charts

Written by Michael Boutros, Sr Technical Strategist with FOREX.com

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