The Canadian Dollar is up nearly 0.5% against the US Dollar after reversing off a key technical confluence zone. The turn off eleven-week highs threatens a larger decline in price while below the objective monthly open. Here These are the updated targets and invalidation levels that matter on the USD/CAD weekly price chart. Review my latest Weekly Strategy Webinar for an in-depth breakdown of this Aussie price setup and more.
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USD/CAD Price Chart – Loonie Weekly
Chart Prepared by Michael Boutros, Technical Strategist; USD/CAD on Tradingview
Notes: In last month’s Canadian Dollar Weekly Outlook in we noted that a four week advance in USD/CAD was targeting critical resistance, “at the 61.8% retracementof the May decline / 2019 high-week close at 1.3355/70…” Price marked a seven-week advance before finally registering a high this week at 1.3382 with USD/CAD now poised to mark an outside weekly-reversal if we close at these levels.
The decline tested support on Thursday at the median-line of the descending pitchfork formation we’ve been tracking off the 2018/2019 highs. A break / close below this trendline is needed to suggest a more significant high is in place targeting the 61.8% retracement of the July advance at 1.3156– look for a bigger reaction there IF reached with weakness beyond this point threatening a drop towards key confluence support at 1.2972-1.3015 where the yearly lows and the 100% extension converges on the 2017/2018 trendline. A topside breach above 1.3355/70 would still have to deal with the highlighted resistance confluence near 1.3430s.
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Bottom line: USD/CAD turned from a technically significant resistance zone this week with the reversal of a near two-month long rally risking further losses for the Dollar. From a trading standpoint, expect sideways to lower from here- look for resistance ahead of the September open at 1.3314 IF price has indeed turned the corner here. I’ll publish an updated USD/CAD Trade Outlook once we get further clarity in near-term price action.
USD/CAD Sentiment – Loonie Price Chart
- A summary of IG Client Sentiment shows traders are net-short USD/CAD- the ratio stands at -1.3 (43.5% of traders are long) – weak bullishreading
- Traders have remained net-short since July 23rd; price has moved 1.2% higher since then
- Long positions are32.8% higher than yesterday and 41.0% higher from last week
- Short positions are 12.5% lower than yesterday and 36.3% 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 Loonie 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