The Canadian Dollar is down more than 0.55% against the US Dollar with a breach of the monthly opening-range taking USD/CAD to levels not seen since January. These are the updated targets and invalidation levels that matter on the USD/CAD charts heading into the close of the week/month. Review my latest Strategy Webinar for an in-depth breakdown of this setup and more.
USD/CAD Daily Price Chart
Technical Outlook: In last week’s USD/CAD analyst pick we noted to, “Look for support ahead of the 1.3435/37 confluence zone IF price is heading higher on this stretch with near-term topside objectives at the May high at 1.3514 and 1.3537– a breach / close there would be needed to validate a breakout of the monthly range.” Price briefly registered a low at 1.3430 early in the week before rallying sharply with the advance failing at the 1.3537 confluence resistance zone yesterday (high registered at 1.3546) – note that daily momentum halted precisely at the 60-threshold and highlights the risk to the near-term breakout.
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USD/CAD 120min Price Chart
Notes: A closer look at price action shows USD/CAD trading within the confines of a near-term ascending pitchfork formation extending off the monthly lows. Note that price found resistance at the 75% line for the second time on this last stretch with the pullback now probing back below the median-line.
Initial support rests with the 5/22 trendline backed closely by the 38.2% retracement at 1.3474– weakness beyond this threshold would risk a larger setback towards the lower 25% line and the 1.3435/37 support pivot- look for a bigger reaction there if reached. Resistance steady at 1.3537 with a breach above the upper parallel / monthly high at ~1.3546 needed to validate the breakout targeting 1.3574 & 1.3599.
Bottom line: USD/CAD has broken above the monthly opening-range highs and IF this breakout is legit, losses should be limited to the lower parallel (currently ~1.3450s) for now. From a trading standpoint, a good place to reduce short-exposure – be on the lookout for possible near-term exhaustion down here. Ultimately, a breach / close above the median-line is needed to keep the long-bias viable. Keep in mind Canada GDP data is slated for Friday morning. Review my latest USD/CAD Weekly Price Outlook for a longer-term look at the technical picture on the Loonie.
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 -2.51 (28.5% of traders are long) – bullishreading
- Traders have remained net-short since May 22nd; price has moved 0.2% higher since then
- Long positions are19.1% higher than yesterday and 10.2% lower from last week
- Short positions are5.8% higher than yesterday and 60.8% 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 less net-short than yesterday but more 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.
See how shifts in USD/CAD retail positioning are impacting trend- Learn more about sentiment!
Relevant US / Canada Economic Data Releases
Active Trade Setups
– Written by Michael Boutros, Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex