Canadian Dollar Short-term Outlook: USD/CAD Breakdown Looms

Canadian Dollar Technical Outlook: USD/CAD Short-term Trade Levels

• USD/CAD breaks below key technical pivot zone into June open- threat for further losses
• USD/CAD monthly opening-range intact into start of the week– CPI on tap
• Resistance 1.3714/40, 1.3795/98, 1.3881/99 (key)- Support 1.3590-1.3614 (key), 1.3504/23, 1.3420

The U.S. Dollar plunged more than 2.7% vs the Canadian Dollar, with USD/CAD breaking below a key technical barrier we’ve bene tracking for weeks now. The immediate focus is on a breakout of the June opening range with price position just below a major pivot zone. Battle lines drawn on the USD/CAD short-term technical charts.

Canadian Dollar Price Chart – USD/CAD Daily

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

Technical Outlook: In last month’s Canadian Dollar Short-term Outlook, we noted that a rebound off confluent support threatened, “a larger recovery within the broader downtrend. From at trading standpoint, look to reduce long-exposure on a stretch towards the upper parallels- rallies should be limited to the 200-day moving average for the yearly downtrend to remain intact with a break / close below 1.3714 needed to mark resumption.”  USD/CAD registered an intraday high at 1.3862 the following day before marking an outside-daily reversal off the highs. The subsequent break / close below a key pivot zone leaves the risk weighted to the downside while below the median-line into the start of the week with the monthly opening-range now in focus.

Canadian Dollar Price Chart – USD/CAD 240min   

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

Notes: A closer look at Canadian Dollar price action shows USD/CAD opening the week just below confluent resistance at 1.3714/40- a region now defined by the 78.6% retracement of the December 2023 rally, the 38.2% retracement of the 2021 advance, and the objective June open. Risk for downtrend resumption while below the median-line.

Initial support rests at 1.3590-1.3613 and is backed by the 1.618% extension of the yearly decline / 78.6% retracement of the 2023 December rally at 1.3504/23 and the March / September lows at 1.3420- both levels of interest of possible downside exhaustion / price inflection IF reached.

A topside breach / close above the median line would threaten a larger recovery within the February downtrend. Initial resistance objective seen at 1.3795 and the 2022 high-close / 2023 high at 1.3881/99- rallies would need to be limited to the upper parallel for the yearly downtrend to remain intact. Broader bearish invalidation stands at the 2022 high / 2020 March weekly reversal close at 1.3977/90.

Bottom line: USD/CAD is threatening a major breakdown here and the immediate focus into the start of the week is on possible resistance head of the monthly open. From at trading standpoint, rallies should be limited to the median-line IF price is head heading lower on this stretch with a close below 1.3590 needed to fuel the next leg of the decline.

Keep in mind the monthly opening-range is preserved into the start of the week with key U.S. inflation data (CPI) on tap Wednesday. Stay nimble into the release and watch the weekly close for guidance here. Review my latest Canadian Dollar Weekly Forecast for a closer look at the longer-term USD/CAD technical trade levels.

Key USD/CAD Economic Data Releases

Economic Calendar - latest economic developments and upcoming event risk.

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• Swiss Franc Short-term Outlook: USD/CHF Bulls Emerge at Support
• Gold Short-term Outlook: XAU/USD Poised for June Breakout
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Written by Michael Boutros, Sr Technical Strategist

Follow Michael on X @MBForex