Canadian Dollar Short-term Outlook: USD/CAD Breaks to Six-Month High

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

USD/CAD rally extends nearly 4% off yearly low- breakout attempts to mark fourth-weekly advance
USD/CAD momentum stretches into overbought territory- trade remains constructive above 200-DMA
Resistance 1.41, 1.4167/78 (key), 1.4235- Support 1.4016/19, 1.3973/78 (key), 1.3920

The Canadian Dollar remains under pressure, with USD/CAD up more than 1.1% since the start of the month. The advance has driven momentum into overbought territory, highlighting stretched short-term conditions, yet the medium-term outlook remains constructive while above the 200-day moving average. Focus now turns to whether this rally can maintain traction as bulls attempt to push through uptrend resistance. Battle lines are 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 my last Canadian Dollar Short-term Outlook, we noted that USD/CAD was testing uptrend resistance and that, “from a trading standpoint, losses would need to be limited to 1.3815 IF price is heading higher on this stretch with a close above the 200-day moving average needed to mark resumption of the multi-month uptrend.” USD/CAD briefly registered an intraday low at 1.3896 later that day before reversing sharply higher with price breaking through the 200-day moving average last week. The rally is now attempting to breach the median-line of the ascending pitchfork we have been tracking off the September lows and the focus is on a weekly close above this slope to keep the immediate advance viable 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 a break & re-test of the 200-day moving average last week with the bulls now attempting to mark a fourth consecutive weekly advance. Initial support rests with May high / 38.2% retracement of the yearly range at 1.4016/19 and is backed closely by the 2000-day moving average / 2022 high at 1.3973/78. Note that the 25% parallel converges on this threshold over the next few days and a slip below this slope would threaten a larger pullback within the multi-month uptrend. Subsequent support rests with the monthly open at 1.3920 with broader bullish invalidation now raised to the 2022 high-close / 2023 high at 1.3881/99.

Initial resistance is now in view at the 1.41-handle and is backed by the 50% retracement / November high at 1.4167/78- look for a larger reaction there IF reached. Subsequent topside objectives eyed with the March low at 1.4235 and the 61.8% retracement at 1.4315.

Bottom line: The USD/CAD breakout takes daily momentum into overbought territory and keeps the technical outlook tilted to the topside- the immediate focus is on today’s close with respect to the median-line. From a trading standpoint, losses should be limited to the 200-day moving average IF price is heading higher on this stretch with a close above 1.41 needed to fuel the next major leg of the advance.

Markets remain on edge over the escalating China trade dispute as concerns mount about President Xi’s move to restrict exports of rare earth minerals and magnets. Keep in mind we also get the releases of key inflation data next week from U.S. & Canada next week – stay nimble here and watch the weekly closes 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

Economic Calendar - latest economic developments and upcoming event risk.

Active Short-term Technical Charts

Written by Michael Boutros, Sr Technical Strategist

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