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 is down 0.65% against the US Dollar from last week’s high with price continuing to consolidate around a key technical confluence at 1.3435. These are the updated targets and invalidation levels that matter on the USD/CAD weekly price chart. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.
USD/CAD Weekly Price Chart
Notes: USD/CAD has continued to straddle the 2017 open / 61.8% retracement of the late-2018 decline at 1.3435/37 with the monthly opening-range still intact heading into the start of the week. Momentum indicators have flat-lined with price continuing to coil around this zone.
Key support rests with the April lows and converges on a pair of trendlines around 1.3274– a break below this zone would suggest a larger correction is underway targeting 1.3052/99– look for a bigger reaction there IF reached. A break of the monthly rang-highs would keep the focus back on 1.3647/86–ta region defined by the 2017-high-week close, 61.8% retracement of the 2016 decline and the 2018 high.
For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy
Bottom line: The immediate focus is on a breakout of the May range between 1.3377 – 1.3505 for guidance. From a trading standpoint, the near-term risk is weighted to the downside after Friday’s reversal but initial monthly-open support rests just lower at 1.3388. I’ll publish an updated USD/CAD Price Outlook once we get further clarity in near-term price action.
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USD/CAD Trader Sentiment
- A summary of IG Client Sentiment shows traders are net-short USD/CAD – the ratio stands at -1.52 (39.7% of traders are long) – weak bullish reading
- Traders have remained net-short since May 1st; price has moved 0.1% lower since then
- Long positions are 42.6% higher than yesterday and 21.0% higher from last week
- Short positions are 13.8% lower than yesterday and 18.6% 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.
See how shifts in USD/CAD retail positioning are impacting trend- Learn more about sentiment!
Previous Weekly Technical Charts
— Written by Michael Boutros, Technical Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex