In this series we scale-back and look at the broader technical picture to gain a bit more perspective on where we are in trend. The Canadian Dollar has rallied more than 3.1% against the US Dollar since the start of the year with USD/CAD reversing sharply from a critical resistance barrier we’re been tracking. Here are the key targets & invalidation levels that matter on the USD/CAD weekly chart into the start of the year.

USD/CAD WEEKLY PRICE CHART

(Click on image to enlarge)

Notes: In last month’s Canadian Dollar Weekly Technical Outlook we noted that USD/CAD was testing a, “major confluence resistance zone at the 61.8% retracement of the 2016 decline / 2017 high-week close at 1.3647/86.” Price registered a high at 1.3364 before posting an outside-week reversal with the decline breaking below the October trendline.

Price has already covered 50% of the recent advance with and the 2018 RSI support trigger now being tested. Although we could see some relief near-term, the broader focus remains weighted to the downside while below the 2017 open at 1.3435 with subsequent support objectives eyed at the 61.8% retracement at 1.3119 and the highlighted slope / moving average confluence zone around 1.3000/30- levels of interest for possible price exhaustion.

Bottom line: USD/CAD has broken below medium-term uptrend support after rebounding off critical resistance last week and leaves the risk for further losses in price. We’ll continue to favor fading strength while below 1.3435 – Ultimately, a larger pullback may offer more favorable long-entries closer to the lower parallels. I’ll publish an updated USD/CAD technical outlook once we get further clarity on near-term price action.

USD/CAD TRADER SENTIMENT

• A summary of IG Client Sentiment shows traders are net-short USD/CAD - the ratio stands at -1.18 (45.9% of traders are long) – weak bullish reading
• Traders have remained net-short since October 9th; price has moved 2.1% higher since then
• Long positions are 13.5% higher than yesterday and 223.8% higher from last week
• Short positions are 11.9% lower than yesterday and 40.9% 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 less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current USD/CAD price trend may soon reverse lower despite the fact traders remain net-short.