Canadian Dollar Price Outlook: USD/CAD Recovery Eyes Trend Resistance
The Canadian Dollar is on the defensive with the recent US Dollar recovery taking USD/CAD within striking distance of multi-week downtrend resistance. These are the updated targets and invalidation levels that matter on the USD/CAD charts. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.
USD/CAD PRICE CHART - DAILY
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Technical Outlook: In my latest Canadian Dollar Price Outlook we noted that the advance was, “targeting confluence resistance at 1.3357/63- a region defined by the median-line of the descending pitchfork formation extending off the May highs, the 38.2% retracement of recent sell-off, the May swing low and near-term up-channel resistance.” A topside breach on Friday fueled a weekly close just below the 1.3435/37 pivot zone with trendline confluence just higher around ~1.3460s – we’re looking for possible exhaustion off one of these two zones.
USD/CAD 120MIN PRICE CHART
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Notes: A closer look at Loonie price action shows USDCAD holding within the confines of a descending pitchfork extending off the May highs and the risk remains weighted to the downside while within this formation. Interim support rests back at 1.3357/63 with a break below the median-line needed to mark resumption of the broader June decline targeting 1.3258 & 1.3175/98. A topside breach would keep the focus on subsequent resistance objectives at 1.3495 & 1.3537.
Bottom line: The USD/CAD recovery is now approaching technical resistance targets into 1.3460 and we’re looking for signs of exhaustion in this zone. From a trading standpoint, look to reduce long-exposure / raise protective stops on a move towards the upper parallels – we’ll be looking for a reaction there IF reached. Review my last Canadian Dollar Weekly Price Outlook for a longer-term technical picture on USD/CAD.
USD/CAD TRADER SENTIMENT
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- A summary of IG Client Sentiment shows traders are net-short USD/CAD - the ratio stands at -1.86 (35.0% of traders are long) –bullish reading
- Long positions are 13.4% higher than yesterday and 23.8% lower from last week
- Short positions are 26.9% higher than yesterday and 65.3% 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 & 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.