The Canadian Dollar is on the counteroffensive against the US Dollar after reversing off key resistance last week with USD/CAD falling more than 0.8% off the monthly highs. While the near-term risk remains weighted to the downside, the decline is now approaching broader uptrend support and we’re looking for a reaction just lower. These are the updated targets and invalidation levels that matter on the USD/CAD price charts.

CANADIAN DOLLAR PRICE CHART – USD/CAD DAILY

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

Technical Outlook: In my last Canadian Dollar Price Outlook we noted that the USD/CAD rally was, “now eyeing confluence resistance at 1.3330/36- a region defined by the September high-day close at and the 61.8% retracement of the May decline. The focus is on a reaction off this threshold with the immediate long-bias vulnerable while below.” Price registered a high at 1.3329 last week before reversing with the sell-off now attempting to break below monthly open support at 1.3236- a close below this threshold exposes confluence support at the 38.2% retracement / 100% extension at 1.3174/85; looking for a reaction there IF reached.

CANADIAN DOLLAR PRICE CHART – USD/CAD 120MIN

(Click on image to enlarge)

Notes: A closer look at Loonie price action sees USD/CAD continuing to trade within the confines of a descending pitchfork formation extending off February highs with price testing fresh monthly lows today in New York trade. Initial support rests with the lower parallel, currently, ~1.3210s with a break below 1.3174/85 ultimately needed to suggest a larger reversal is underway targeting subsequent support objectives at 1.3141 and 1.3096-1.3102. Weekly open resistance stands at 1.3245 with near-term bearish invalidation set to the weekly opening-range highs at 1.3278.

Bottom line: USD/CAD is attempting to break monthly opening-range and leaves the risk lower for now while within this formation. From a trading standpoint, look to reduce short-exposure / lower protective stops on a test of key support / the lower parallel – an area of interest for possible downside exhaustion. 

CANADIAN DOLLAR TRADER SENTIMENT – USD/CAD PRICE CHART

(Click on image to enlarge)

• A summary of IG Client Sentiment shows traders are net-short USD/CAD - the ratio stands at –3.42 (22.62% of traders are long) – bullish reading
• Long positions are3.08% lower than yesterday and 44.00% higher from last week
• Short positions are1.49% lower than yesterday and 24.72% lower 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. Yet traders are more net-short than yesterday but less net-short from last week and the combination of current positioning and recent changes gives us a further mixed USD/CAD trading bias from a sentiment standpoint.