Canadian Dollar Forecast: USD/CAD Recovers Into Key Resistance

Canadian Dollar Technical Forecast: USD/CAD Weekly Trade Levels

• USD/CAD rebounds off downtrend support at fresh yearly low- attempts to mark second weekly advance
• USD/CAD rally exhausts into resistance at former support- risk for exhaustion / price inflection into monthly cross
• Resistance 1.3795-1.3835, 1.3963-1.4018 (key)– Support 1.3639, 1.3504/23 (key), 1.3360

The Canadian Dollar is under pressure again this week with the USD/CAD attempting to mark a second consecutive weekly advance. A rebound off the yearly downtrend is testing initial resistance at former support into the close of the month with major U.S. inflation data on tap Friday. Battle lines drawn on the USD/CAD weekly technical chart.  

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Canadian Dollar Price Chart – USD/CAD Weekly

Chart Prepared by Michael Boutros, Sr. Technical Strategist; USD/CAD on TradingView

Technical Outlook: In my last Canadian Dollar Technical Forecast we noted that USD/CAD had, “broken below multi-year uptrend support and threatens further losses in the weeks ahead. From a trading standpoint, look to reduce portions of short-exposure / lower protective stops on stretch towards 1.3523 IF reached- rallies should be limited to 1.3795 IF price is heading lower on this break with a close sub-1.35 needed to fuel the next major leg of the decline.” Price briefly registered in intraday low at 1.3540 last week before mounting a massive outside-weekly reversal off the yearly lows.

The subsequent rally extended more than 1.9% off the low with the advance exhausting into resistance this week at 1.3795-1.3836- a region defined by the 61.8% retracement of the late-2023 advance, the April low-close, and the 23.6% retracement of the yearly range. Looking for inflection off this mark to offer guidance with the immediate recovery vulnerable while below.

Initial weekly support rests with the 61.8% retracement of the June range at 1.3639 with key support steady at the 1.618% extension of the February decline / 78.6% retracement at 1.3504/23- look for a larger reaction there If reached with a close below needed to mark resumption of the yearly downtrend. Subsequent support objectives rest with the 2024 low-week clow (LWC) at 1.3360 and the 2023 LWC at 1.3218.

A topside breach / close above the 2022 trendline (red) is needed to suggest a more significant low is in place / a larger recovery is underway with the next major technical consideration eyed at 1.3963-1.4018- a region defined by the 52-week moving average, the 2022 swing high and the 38.2% retracement. A weekly close above this key pivot zone is ultimately needed to invalidate the yearly downtrend in USD/CAD.

Bottom line: A rebound off the yearly channel is now approaching initial resistance at former support- looking for possible price inflection off the 1.3795-1.3835 zone into the monthly cross. From a trading standpoint, rallies would need to be limited to the 2022 trendline IF price is heading lower on this stretch / to validate a break of the multi-year uptrend with a close below 1.3504 still needed to mark resumption.

Keep in mind we are heading into the close of the month / quarter with U.S. Personal Consumption Expenditures (the Fed’s preferred inflationary gauge) on tap Friday. Stay nimble into the release and watch the weekly closes here for guidance. Review my latest Canadian Dollar Short-term Outlook for a closer look at the near-term USD/CAD technical trade levels.

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--- Written by Michael Boutros, Sr Technical Strategist with FOREX.com

Follow Michael on X @MBForex