- Updated weekly technicals on USD/CAD- price recovery approaching critical resistance
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In this series we scale-back and take a look at the broader technical picture to gain a bit more perspective on where we are in trend. The Canadian Dollar has been under considerable pressure for the past three weeks (USD/CAD higher more-than 2% month-to-date) with price now testing a critical resistance confluence ahead of the Bank of Canada rate decision on Wednesday. Here are the key targets & invalidation levels that matter on the USD/CAD weekly chart. Review this week’s Strategy Webinar for an in-depth breakdown of this setup and more.
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USD/CAD Weekly Price Chart
Notes: USD/CAD broke above 2016 pitchforkresistance back in June with price rebounding off this same slope into the start of October trade. Initially, the move looked like a breakdown in price – we were wrong! The subsequent recovery fueled a three-week rally with USD/CAD now approaching 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). Note that weekly RSI is also testing a resistance trigger extending off the yearly highs in momentum.
A breach / close above this threshold is needed to keep the long-bias viable with such a scenario targeting the 50% retracement of the 2016 decline at 1.3376 backed by 1.3647/86. Initial support rest with the monthly low-week close / 200-week moving average at ~1.2939/70 backed by the 52-week at ~1.2860s and a more significant confluence at the 100% extension at 1.2728.
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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. Keep in mind the Bank of Canada interest rate decision is on tap this week with markets already pricing in a 25basis point hike to 1.75%. 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.
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USD/CAD Trader Sentiment
- A summary of IG Client Sentiment shows traders are net-short USD/CAD – the ratio stands at -1.66 (37.6% of traders are long) – bullish reading
- Traders have remained net-short since October 9th; price has moved 1.1% higher since then
- Long positions are15.1% higher than yesterday and 5.4% higher from last week
- Short positions are 9.2% higher than yesterday and 19.9% 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. Yet traders are less net-short than yesterday but more net-short from last week andthe combination of current positioning and recent changes gives us a further mixed USD/CAD trading bias from a sentiment standpoint.
See how shifts in USD/CAD retail positioning are impacting trend- Learn more about sentiment!
Relevant USD/CAD Economic Data Releases
Economic Calendar– for the latest economic developments and upcoming event risk. Learn more about how we Trade the News in our Free Guide!
Previous Weekly Technical Perspectives
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- Crude Oil (WTI)
- Euro vs Japanese Yen (EUR/JPY)
- New Zealand Dollar (NZD/USD)
- Australian Dollar (AUD/USD)
- Dollar Index (DXY)
- Euro (EUR/USD)
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