The Canadian Dollar is slipped more than 1.1% against the US Dollar over the past three sessions with the advance now testing confluence resistance at the monthly highs – our focus is on today’s close. These are the updated targets and invalidation levels that matter on the USD/CAD charts this week. Review this week’s Strategy Webinar for an in-depth breakdown of this Loonie trade setup and more.
USD/CAD Price Chart – Loonie Daily
Technical Outlook: In my latest Canadian Dollar Weekly Price Outlook we noted that, “the immediate focus is on a reaction of this key zone at 1.2972-1.3052 – watch the weekly close. From a trading standpoint, look to reduce short-exposure / lower protective stops in this zone. USD/CAD tested this zone for more than four weeks with yesterday’s rally through the monthly open at 1.3076 now attempting to breach the objective July opening-range highs at 1.3145. Note that basic channel resistance extending off the yearly highs also converges on this region and further emphasizes the significance of today’s close.
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USD/CAD Price Chart – Loonie 120min
Notes: A closer look at Loonie price action shows USD/CAD trading within the confines of an ascending pitchfork formation extending off the monthly lows with the advance now testing confluence resistance just above 1.3145. A topside breach / close above this region is needed to keep the long-bias viable targeting the upper parallel (currently ~1.32) and the 38.2% retracement of the May decline at 1.3226.
Look for initial support at the median-line, currently ~1.3115 backed by the 25% line near 1.3080. Ultimately a break below the weekly opening-range lows at 1.3040 would be needed to mark resumption lower- such a scenario would risk a drop towards confluence Fibonacci support at 1.2971.
Bottom line: The USD/CAD rally is now testing key confluence resistance at 1.3145/60 and leaves the immediate advance vulnerable while below this threshold near-term. From a trading standpoint, a good place to reduce long-exposure / raise protective stops – be on the lookout for possible exhaustion. Ultimately, a close above is needed to suggest a larger breakout is underway and validate a breach of the monthly opening-range. Failure here would have me looking for support ahead of the monthly open (1.3076) IF price is indeed heading higher.
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-long USD/CAD – the ratio stands at +1.05 (51.2% of traders are long) – neutral reading
- Long positions are 12.2% lower than yesterday and 22.9% lower from last week
- Short positions are 18.1% higher than yesterday and 1.7% 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. Yet traders are less net-long than yesterday & compared with last week and the recent changes in sentiment warn that the current USD/CAD price trend may soon reverse higher despite the fact traders remain net-long.
See how shifts in USD/CAD retail positioning are impacting trend- Learn more about sentiment!
Relevant US / Canada Data Releases
Active Trade Setups
– Written by Michael Boutros, Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex