Canadian Dollar Short-term Outlook: USD/CAD Retests Pivotal Resistance– Inflection Risk Builds
USD/CAD rallied back into a major resistance zone at the monthly high. The reaction here may determine whether the rally extends or rolls over.
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Canadian Dollar Technical Outlook: USD/CAD Short-term Trade Levels
- USD/CAD USD/CAD has erased its recent pullback and returned to a confluence resistance zone near the monthly range highs.
- Price continues to trade within a multi-week ascending pitchfork structure, leaving the advance vulnerable while capped beneath this upper boundary.
- Event risk on tap into the close of the month with US PPI & Canada Q4 GDP Friday
- Resistance 1.3722/33 (key), 1.3759, 1.3811- Support 1.3680, 1.3617, 1.3575/76 (key)
USD/CAD has rallied back toward a technically significant barrier after fully retracing its recent decline, placing price once again at a pivotal inflection zone. This area marks the upper boundary of the February range and aligns with structural retracement resistance within the broader trend. With the weekly opening range forming just beneath this level, the market now approaches a decisive test. A confirmed move higher would strengthen the case for a broader recovery phase, while failure to sustain gains at resistance would reinforce the risk of renewed downside pressure. Battle lines 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 approaching resistance and that, “From a trading standpoint, losses would need to be limited to 1.3566 IF price is heading higher on this stretch with a close above 1.3733 needed to fuel the next major leg of the advance.” The rally extended 1.8% off the January low with price registering an intraday high at 1.3725 three-days later before exhausting. A decline of 1.6% off the February high has been completely erased with USD/CAD trading into confluent resistance again today at 1.3722/33- a region defined by the September & August swing lows, the objective yearly open, the February opening-range high, and the 38.2% retracement of the November decline. The immediate focus is on possible inflection off this mark into the close of the month with the near-term advance vulnerable while below.
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 pitchfork extending off the monthly low with the 75% parallel highlighting key resistance at 1.3722/33. The weekly opening-range is taking shape just below and the breakout should offer guidance on the next directional move here.
Weekly open support rests at 1.3680 and is backed by the monthly open at 1.3617. Key support / bullish invalidation rests with the 61.8% retracement of the late-January advance and the February low-day close (LDC) at 1.3575/76. A break / daily close below this threshold would be needed to suggest a more significant high is place and a larger reversal is underway towards the January low and the September 2024 LDC at 1.3482/85.
A topside breach / close above this pivot zone exposes the 61.8% retracement of the year-to-date range at 1.3759. Note that the November trendline converges on this level into the close of the month and strength surpassing this zone is needed to fuel the next major leg of the advance. Subsequent resistance is eyed at the 200-day moving average which converges on the 50% retracement of the broader November decline near ~1.3811. Look for a larger reaction there IF reached.
Bottom line: The USD/CAD is testing resistance at the monthly range highs today and the focus is on a reaction off this pivot zone. From a trading standpoint, losses should be limited to 1.3617 IF price is heading higher on this stretch with a close above 1.3759 needed to fuel the next major leg of the advance.
Keep in mind we get the release of US producer prices (PPI) and Canada Q4 GDP on Friday. Stay nimble into the monthly crossover and watch the weekly closes here 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.
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Written by Michael Boutros, Senior Technical Strategist
Follow Michael on X @MBForex
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