Canadian Dollar Forecast: USD/CAD Rejected at Resistance Again – Breakdown Risk Builds

Canadian Dollar Technical Forecast: USD/CAD Weekly Trade Levels

• USD/CAD failed to secure a weekly close above major resistance for a second consecutive week, reinforcing the ceiling near the yearly open.
• The pair remains confined within a tightening range, with support clustered near recent range lows and long-term trendline confluence.
• Key US inflation & Canada employment data on tap next week
• Resistance 1.3725/33 (key), 1.3848, 1.3889-1.3929 – Support 1.3617, 1.3586 (key), 1.3494

USD/CAD has turned lower after another unsuccessful attempt to push through a key resistance barrier, leaving the recent advance vulnerable into the weekly close. Despite briefly trading above prior highs, buyers were unable to sustain momentum, reinforcing the importance of this ceiling within the broader structure. Price is now drifting back toward a well-defined support band that has held the range in place over the past several weeks. A decisive break beneath this floor would shift the tone more decisively in favor of sellers, while stabilization here would keep the broader range intact heading into upcoming macro catalysts. Battle lines drawn 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 last month’s Canadian Dollar Technical Forecast we noted that USD/CAD had, “rebounded off multi-year slope support with pivotal resistance now in view near the yearly open. From a trading standpoint, losses should be limited to 1.3617 IF price is heading higher on this stretch with a close above 1.3733 needed to suggest fuel the next leg of the advance.” Despite registering an intraday high at 1.3753, the bulls were unable to mark a daily / weekly close above resistance and a decline of nearly 1% off the weekly highs keeps the February advance vulnerable in the days ahead.

Initial support remains with the yearly low-week close at 1.3617 and is backed closely by the 61.8% retracement of the February rally at 1.3586. Note that the 2023 trendline converges on this level over the next few weeks and a break / weekly close below would be needed to mark resumption of the broader downtrend. Subsequent support objectives are eyed at the 2024 August low-close at 1.3494 and the 100% extension of the November decline at 1.3431.

Key resistance remains at 1.3725/33- a region defined by the objective yearly open, the 38.2% retracement of the November decline, and the 2023 swing high. Note that the 75% parallel converges on this threshold next week and a break / weekly close above this slope is needed to suggest a more significant recovery is underway in USD/CAD. Subsequent resistance objectives are eyed at the 52-week moving average (currently near ~1.3848) with the next major technical consideration on eyed at the 61.8% retracement and the 2023 / 2026 highs at 1.3889-1.3929.

 

Bottom line: The USD/CAD advance was rejected at resistance for a second consecutive week with the price now range support. The focus is on a weekly close breakout of the 1.3617-1.3733 zone for guidance. From a trading standpoint, rallied should be limited to this week’s high IF price is heading lower on this stretch with a close below 1.3586 needed to fuel the next major leg of the decline.

Keep in mind next week we get another batch of key inflation reports with the February Consumer Price Index (CPI) and the January Personal Consumption Expenditures (PCE) on tap. With the Friday’s Non-Farm Payroll report coming in far below expectations (-92K), the Fed is once again confronted between the threat rising prices and weaker labor growth and traders will be trying to assess the impact on the interest rate outlook. As of now, Fed Fund Futures are pricing a probability of just above 50 percent the next rate-cut will be in June. This has shifted dramatically on the heels of today’s labor report and inflation data next week may see further adjustment to the monetary policy outlook. Stay nimble into the releases and watch the weekly close 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, Senior Technical Strategist

Follow Michael on X @MBForex