The Canadian Dollar is virtually unchanged against the US Dollar this week with USD/CAD trading just below key resistance into the close of the month / quarter. We’re looking for a break of the weekly opening-range with the broader outlook still weighted to the topside. 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.
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USD/CAD Daily Price Chart
Technical Outlook: In my latest USD/CAD Technical Outlook our bottom line noted that price had, “responded to confluence support and while the immediate threat is higher, the recovery remains vulnerable sub-1.3437. From a trading standpoint, look to reduce long-exposure on a move towards Fibonacci resistance and be on the lookout for possible price exhaustion.” USD/CAD has continued to hold just below this key threshold with the long-bias still vulnerable while below.
Key confluence support rests at 1.3308/25 – a region defined by the 61.8% retracement of the mid-March advance, the 100-day moving average and the 2018 pitchfork support. Weakness beyond this zone would exposes 1.3248 (bullish invalidation)- look for a larger reaction there IF reached. Ultimately a topside breach / close above 1.3437 is needed to mark resumption targeting the upper parallel around ~1.3520.
USD/CAD 120min Price Chart
Notes: A closer look at price action shows Loonie trading within the confines of an ascending pitchfork formation extending off last week’s lows with the weekly opening-range taking shape just below the 1.3435/37 resistance barrier. Initial support rests with the median-line around 1.3385 backed by the 38.2% retracement at 1.3370– a break there would shift the focus towards subsequent support objectives at 1.3347 and 1.3325– both levels of interest for possible exhaustion / long-entries. A topside breach targets the March high at 1.3467 backed by the upper parallel around ~1.3515.
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Bottom line:The focus is on a reaction at this key resistance zone and while the broader outlook remains weighted to the topside, the advance remains vulnerable near-term. USD/CAD has set a well-defined weekly opening-range just below resistance- look for the break. From a trading standpoint we’ll favor fading weakness while within this formation targeting a topside breach. Keep in mind we’re heading into the close of the month / quarter with Canada GDP and US Personal Consumption Expenditure (PCE) on tap tomorrow morning – stay nimble.
For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy
USD/CAD Trader Sentiment
- A summary of IG Client Sentiment shows traders are net-short USD/CAD- the ratio stands at -1.48 (40.3% of traders are long) – bullish reading
- Long positions are0.6% lower than yesterday and unchanged from last week
- Short positions are 8.5% higher than yesterday and 38.0% 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 USDCAD-bullish contrarian trading bias from a sentiment standpoint.
See how shifts in USD/CAD retail positioning are impacting trend- Learn more about sentiment!
Relevant US / CanadaEconomic Data Releases
Active Trade Setups
– Written by Michael Boutros, Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex