Canadian Dollar Short-term Outlook: USD/CAD Bulls Brace for BoC

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

USD/CAD attempting third weekly advance- bulls stall at major technical resistance
Bank of Canada interest rate decision / US CPI on tap- risk for major inflection ahead
Resistance 1.4189-1.42 (key), 1.4310, 1.4350/57- Support 1.4085, 1.4005, 1.3978/90 (key)

The US Dollar has rallied more than 1.3% since the start of the month with the late-September rally testing major technical resistance today. The focus now shifts to major event risk tomorrow with the US Consumer Price Index (CPI) and the Bank of Canada interest rate decision on tap. Battle lines drawn on the USD/CAD short-term technical charts.

Review my latest Weekly Strategy Webinar for an in-depth breakdown of this Loonie setup and more. Join live on Monday’s at 8:30am EST.

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 highlighted the threat for a deeper pullback in USD/CAD after price exhausted into confluent resistance and that, “Ultimately, losses would need to be limited to 1.3881 for the September uptrend to remain viable with a close above 1.4089 needed to mark uptrend resumption.” USD/CAD briefly registered an intraday low at 1.3927 before rebounding sharply higher with the advance stretching into confluent resistance today at 1.4189-1.42- looking for a reaction here with the immediate advance vulnerable while below.

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 the USD/CAD continuing to trade within the confines of the ascending pitchfork we’ve been tracking off the September/October low. Note that the upper parallel further highlights resistance into the 1.42-handle and the focus is on a possible inflection off this threshold over the next few days.

A topside breach / close above would likely fuel another accelerated advance towards subsequent resistance objectives at the 61.8% extension of the 2021 advance at 1.4310 and the 88.6% retracement of the 2020 decline / 2020 high-week close (HWC) at 1.4350/57. Both level of interest for possible topside exhaustion IF reached.

Initial support now rests back at the 78.6% retracement at 1.0485 – a break below the median-line would threaten a larger correction within the broader September uptrend towards the objective monthly open at 1.4005 and 1.3978/90- a region defined by the 2022 high and the 2020 March weekly reversal close. We’ll reserve this threshold as our medium-term bullish invalidation level and a close below this pivot zone would suggest a more significant high was registered this week / a larger trend reversal is underway. Next major support consideration rests with the 2022 high-close / 2023 high at 1.3881/99.

Bottom line: USD/CAD has extended into confluent uptrend resistance with major event risk on tap tomorrow. From at trading standpoint, a good zone to reduce portions of long-exposure / raise protective stops – losses would need to be limited to the median-line IF price is heading higher on this stretch with a close above 1.42 needed to fuel the next leg of the advance.

Keep in mind US CPI and the Bank of Canada (BOC) interest rate decision are on tap tomorrow. Markets participants are relatively split over the potential for 25 or 50 basis points- expect some volatility here. Stay nimble into the releases and watch the weekly close for guidance. Review my latest Canadian Dollar Weekly Technical Forecast for a closer look at the longer-term USD/CAD trade levels.

Key USD/CAD Economic Data Releases

Economic Calendar - latest economic developments and upcoming event risk.

Active Short-term Technical Charts

Written by Michael Boutros, Sr Technical Strategist

Follow Michael on X @MBForex

StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 67.6% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Please ensure you fully understand the risks involved by reading our full risk warning.

FOREX.com is a trading name of StoneX Europe Limited, and FOREX.com/ie is a domain operated by StoneX Europe Ltd, a member of StoneX Group Inc. StoneX Europe Ltd, is a Cyprus Investment Firm (CIF) company registered to the Department of Registrar of Companies and Official Receiver with a Registration Number HE409708, and authorized and regulated by the Cyprus Securities & Exchange Commission (CySEC) under license number 400/21. StoneX Europe is a Member of the Investor Compensation Fund (ICF) and has its registered address at Nikokreontos 2, 5th Floor, 1066 Nicosia, Cyprus.

FOREX.com is a trademark of StoneX Europe Ltd, a member of StoneX Group Inc.

This website uses cookies to provide you with the very best experience and to know you better. By visiting our website with your browser set to allow cookies, you consent to our use of cookies as described in our Privacy Policy.

Through passporting, StoneX Europe is allowed to provide its services and products on a cross-border basis to the following European Economic Area ("EEA") states: Austria, Bulgaria, Croatia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden.

StoneX Europe Ltd products, services and information are not intended for residents other than the ones stated above.

StoneX Europe Ltd may make third party material available on this website which may contain information included but not limited to the conditions of financial markets. The material is for information purposes only and does not contain, and should not be construed as containing, investment advice and/or investment recommendation and/or an investment research and/or an offer of or solicitation for any transactions in financial instruments; any decision to enter into a specific transaction shall be made by the client following an assessment by him/her of their situation. StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.