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Canadian Dollar Outlook: USD/CAD Spills into Support- Election Levels

Canadian Dollar Technical Price Outlook: Near-term Trade Levels

  • Canadian Dollar updated technical trade levels – Daily & Intraday Charts
  • USD/CAD testing lower bounds of multi-month price consolidation pattern
  • Monthly open resistance at 1.3313, Support at 1.3046/56, 1.2975 (key)
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The Canadian Dollar is up more than 1.2% against the US Dollar since the start of the week / month with USD/CAD plummeting towards the October lows hours ahead of the first votes are counted for the US Presidential Election. The move takes price into the lower bounds of a multi-month range contraction with major event risk still on tap this week. These are the updated targets and invalidation levels that matter on the USD/CAD price charts. Review my latest Strategy Webinarfor an in-depth breakdown of this Loonie technical setup and more.

Canadian Dollar Price Chart – USD/CAD Daily

Canadian Dollar Price Chart - USD/CAD Daily - US Dollar vs Canadian Dollar Trade Outlook - Technical Forecast

Chart Prepared by Michael Boutros, Technical Strategist; USD/CAD on Tradingview

Technical Outlook: In last month’s Canadian Dollar Price Outlook we noted to be on the lookout for, “basing this week with a breach above this formation needed to shift the focus higher.” A near-term breakout last week fueled a rally of nearly 2.4% off the October lows before failing at confluence resistance at 1.3384-1.3409 into the close. USD/CAD has now covered the entire October monthly range in just four day and leaves price within the confines of a multi-month consolidation pattern heading into the US Presidential Elections.

Daily support rests with the late-August trendline with lateral support eyed lower at the 61.8% Fibonacci retracement of the 2017 rally at 1.3056and the August low at 1.3020. Ultimately, a break / close below yearly open support at 1.2975 is needed to fuel the next leg lower in price towards 1.2887. Weekly / monthly open resistance stands at 1.3313 with a breach / close above 1.3409 needed shift the broader focus higher in USD/CAD.

Canadian Dollar Price Chart – USD/CAD 120min

Canadian Dollar Price Chart - USD/CAD 120min - US Dollar vs Canadian Dollar Trade Outlook - Technical Forecast

Notes: A closer look at Loonie price action shows USD/CAD breaking below an ascending pitchfork formation today with the August consolidation trendline catching the lows in New York. Initial resistance now back at the 1.32-handle backed by 1.3278 and the weekly open at 1.3313– look for a larger price reaction there IF reached for guidance with a break below 1.3046/56 is needed to keep the near-term short-bias viable.

Bottom line: A near-term breakdown in USD/CAD takes price into the lower bounds of a multi-month consolidation pattern heading into the US presidential elections tonight. From a trading standpoint, a good zone to reduce short-exposure / lower protective stops – be on the lookout for topside exhaustion ahead of the weekly open IF price is heading lower with a break / close below 1.3056 needed to suggest a deeper breakdown is underway. At the end of the day – this is a massive coil in price with the FOMC and US Non-Farm Payrolls still on tap this week. Expect volatility, stay nimble and respect the breaks. Review my latest Canadian Dollar Weekly Price Outlook for a closer look at the longer-term USD/CAD technical trade levels.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

Canadian Dollar Trader Sentiment – USD/CAD Price Chart

Canadian Dollar Trader Sentiment - USD/CAD Price Chart - Loonie Trade Outlook - Technical Forecast

  • A summary of IG Client Sentiment shows traders are net-long USD/CAD – the ratio stands at +2.31 (69.75% of traders are long) – bearish reading
  • Long positions are14.81% higher than yesterday and 27.91% lower from last week
  • Short positions are 38.89% lower than yesterday and 33.52% lower from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USD/CAD prices may continue to fall. Traders are further net-long than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger USD/CAD-bearish contrarian trading bias from a sentiment standpoint.

Change in Longs Shorts OI
Daily5%-43%-13%
Weekly-21%-39%-26%

Key US / Canada Data Releases

Key US / Canada Data Releases - USD/CAD Economic Calendar - Loonie Event Risk

Economic Calendarlatest economic developments and upcoming event risk.

Active Technical Setups

– Written by Michael Boutros, Currency Strategist with DailyFX

Follow Michael on Twitter @MBForex