- USD/CAD testing critical resistance zone ahead of BOC – levels to know
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The Canadian Dollar is has plummeted more than 1.4% month-to-date against the greenback with USD/CAD trading just below confluence resistance ahead of the Bank of Canada interest rate decision tomorrow. Here are the updated targets and invalidation levels that matter on the USD/CAD charts. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.
USD/CAD Daily Price Chart
Technical Outlook: In our latest USD/CAD Weekly Technical Outlook, we highlighted a, “critical resistance barrier at 1.3130/55- a region defined by the yearly high-week reversal close, the 61.8% retracement of the June decline and parallel resistance (red).” This key level remains in focus heading into tomorrow’s central bank rate decision.
Note that daily RSI has held sub-60 since the yearly highs registered in June- watch this closely into the close of trade tomorrow. A breach in momentum alongside a rally surpassing 1.3155 would be needed to validate the breakout with such a scenario targeting subsequent objectives at 1.3206 and 1.3257.
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USD/CAD 240 Price Chart
Notes: A closer look at price action shows the USD/CAD trading within the confines of an ascending pitchfork formation extending off the monthly lows with the median-line highlighting interim support at 1.3068/80 (weekly opening-range low & 100-day moving average. A break below this level shifts the focus towards the lower parallels, currently ~1.3020 & 1.2980s- look for a bigger reaction there. Broader bullish invalidation rests at 1.2957.
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Bottom line: “USD/CAD is testing Big resistance here at 1.3130/55 with the immediate long-bias at risk while below.” From a trading standpoint, ‘a good spot wind down long-exposure and raise stops. I’ll be looking for a reaction at this key resistance barrier, initially for a possible exhaustion / fade opportunity- watch the weekly close here for guidance.’
For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy
USD/CAD Trader Sentiment
- A summary of IG Client Sentiment shows traders are net-short USD/CAD – the ratio stands at -2.19 (31.3% of traders are long) – weak bullishreading
- Traders have remained net-short since October 9th; price has moved 1.1% higher since then
- The percentage of traders net-long is now its lowest since October 10th
- Long positions are8.8% lower than yesterday and 5.9% lower from last week
- Short positions are 14.4% higher than yesterday and 10.5% higher 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. Traders are further net-short than yesterday and last week, and the combination of current positioning and recent changes gives us a stronger USD/CAD-bullish contrarian trading bias from a sentiment standpoint.
See how shifts in USD/CAD retail positioning are impacting trend- Learn more about sentiment!
Relevant USD/CAD Data Releases
Economic Calendar – latest economic developments and upcoming event risk. Learn more about how we Trade the News in our Free Guide!
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– Written by Michael Boutros, Currency Strategist with DailyFX
Follow Michael on Twitter @MBForex or contact him at firstname.lastname@example.org