Canadian Dollar Forecast: USD/CAD Breaks Through Support

Canadian Dollar Technical Forecast: USD/CAD Weekly Trade Levels

• USD/CAD breaks multi-year slope support- weekly momentum plunges to four-year lows
• USD/CAD decline now approaching initial support- risk for exhaustion / price inflection
• Resistance 1.3721, 1.3795, 1.3961/78 (key)– Support 1.3504/23, 1.3360, 1.3218

The Canadian Dollar is on the offensive again this week with a break of multi-year trend support taking USD/CAD to eight-month lows today. Price is now within striking distance of initial support objectives and the first major test for the bears. Battle lines drawn on the USD/CAD weekly technical chart.  

Canadian Dollar Price Chart – USD/CAD Weekly

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

Technical Outlook: In last month’s Canadian Dollar Technical Forecast we noted that the USD/CAD recovery had failed at resistance near the yearly moving average and that our focus was on this pullback into, “key support at 1.3721/94- a region defined by the 38.2% retracement of the 2021 advance and the 61.8% retracement of the late-2023 advance. Look for a larger reaction there IF reached with a break / weekly close below needed to invalidate the 2022 uptrend / suggest a larger reversal is underway.” USD/CAD closed below this key pivot zone last week with the subsequent decline now extending more than 2.9% off the May highs.

Weekly momentum has now dropped to the lowest levels since 2021 and a break of the 2021 uptrend (2022 trendline) threatens further losses ahead. Initial weekly support rests at the 1.618% extension of the February decline / 78.6% retracement of the late-2023 advance near 1.3504/23. Note that basic channel support converges on this threshold over the next few weeks and further highlights the technical significance of this zone (area of interest for possible downside exhaustion / price inflection IF reached). Subsequent support rests with the 2024 low-week clow (LWC) at 1.3360 and the 2023 LWC at 1.3218.

Weekly resistance is now eyed back at 1.3721 & 1.3795. Broader bearish invalidation is now lowered to the 52-week moving average / 2022 swing high near ~1.3961/78- a breach / close above the yearly channel would ultimately be needed to suggest a more significant low is in place.

Bottom line: USD/CAD has 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.

Keep in mind the FOMC interest rate decision is on tap next week with the markets anticipating an updated batch of economic projections on growth, employment, and inflation. 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