The Canadian Dollar has covered all of last week’s range with the recent breakout in USD/CAD pulling back today from near-term technical resistance. The broader advance may be vulnerable here as price approaches a critical resistance zone we’ve been tracking for weeks now. These are the updated targets and invalidation levels that matter on the USD/CAD price charts.

CANADIAN DOLLAR PRICE CHART – USD/CAD DAILY

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Chart Prepared by Michael Boutros, Technical Strategist; USD/CAD on Tradingview

Technical Outlook: In my latest Canadian Dollar Price Outlook we noted that USD/CAD was, “testing levels of interest for resistance and leaves the immediate long-bias vulnerable,” while below 1.3250s. price broke higher in the following days with the rally turning today off near-term channel resistance.

Critical daily resistance stands just higher at the September high-day close / 61.8% retracement of the May decline at 1.3335/56 – a breach / close above this threshold would be needed to keep the broader long-bias viable. Daily support rests with the lower parallel, currently ~1.3220s – look for a reaction there IF reached.

CANADIAN DOLLAR PRICE CHART – USD/CAD 120MIN

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Notes: A closer look at Loonie price action shows USD/CAD reversing off channel resistance this week with key resistance just higher at 1.3335/56- the advance is vulnerable into this zone. Initial support rests at 1.3270 backed closely by 1.3253 and the weekly open at 1.3224 – losses should be limited to this threshold IF indeed price is heading higher. A topside breach above this resistance zone would shift the focus toward subsequent resistance objectives at 1.3384 and the 2017 open / 61.8% retracement at 1.3435/37.

Bottom line: USD/CAD is approaching a critical resistance threshold and we’re on the lookout for near-term topside exhaustion up here. From a trading standpoint, a good place to reduce long-exposure / raise protective stops. IF price fails at these levels, look for a move back towards parallel support for guidance. 

CANADIAN DOLLAR TRADER SENTIMENT – USD/CAD PRICE CHART

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• A summary of IG Client Sentiment shows traders are net-short USD/CAD - the ratio stands at -3.12 (24.26% of traders are long) – bullish reading
• Long positions are6.22% lower than yesterday and 39.88% lower from last week
• Short positions are5.70% lower than yesterday and 22.89% higher from last week
• We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests USD/CAD prices may continue to rise. Traders are further net-short than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger USD/CAD-bullish contrarian trading bias from a sentiment standpoint.