Canadian Dollar Technical Update: Key Levels for USD/CAD Short-term Trading
- USD/CAD poised for a possible third consecutive weekly increase, with bullish momentum facing strong technical resistance.
- Critical economic events ahead: Bank of Canada interest rate announcement and US CPI data may trigger significant market movements.
- Resistance levels established at 1.4189-1.42, followed by 1.4310 and 1.4350/57. Key support levels noted at 1.4085, 1.4005, and 1.3978/90.
The US Dollar has seen a rise of over 1.3% since the month's start, with recent gains testing significant technical barriers today. The market is now focused on high-impact economic data releases tomorrow, which include the US Consumer Price Index (CPI) and the Bank of Canada's interest rate decision, marking critical juncture points for USD/CAD's short-term technical framework.
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Chart Prepared by Michael Boutros, Sr. Technical Strategist; USD/CAD on TradingView
Technical Assessment: In the previous month’s Canadian Dollar Short-term Review, we noted the potential for a deeper correction in USD/CAD as the price approached significant resistance. We stated, “For the September uptrend to continue, losses should be curtailed at 1.3881, while a close above 1.4089 is needed to signal an uptrend continuation.” After dipping to an intraday low of 1.3927, USD/CAD sharply rebounded, now confronting the confluent resistance at 1.4189-1.42, anticipating a critical response around this level as upward progress remains fragile.
Canadian Dollar Price Chart – USD/CAD 240min
Chart Prepared by Michael Boutros, Sr. Technical Strategist; USD/CAD on TradingView
Observations: A detailed analysis of Canadian Dollar movements indicates that USD/CAD continues to follow an ascending pitchfork structure originating from September/October lows. The upper boundary suggests heightened resistance around the 1.42 level, and attention is directed towards a potential reversal at this point in the coming days.
A breakout above this resistance could lead to a considerable rally targeting the next resistance levels of the 61.8% extension of the 2021 move at 1.4310 and the 88.6% retracement of the 2020 decline, along with the high-week close from the same year at 1.4350/57. Watching these levels for potential pullback signals if reached is essential.
First support is situated at the 78.6% retracement at 1.4085. A breach below the median line may initiate a significant correction within the broader September uptrend towards the monthly open at 1.4005 and 1.3978/90, a critical range comprising the 2022 high and the March 2020 weekly reversal close. This region serves as a critical pivot point; a close below here would signify a considerable shift in trend accompanied by a potential high formation this week. Next major support is at the 2022 high close and 2023 high of 1.3881/99.
Conclusion: USD/CAD has encountered significant uptrend resistance with crucial economic events approaching. It’s advisable to consider reducing long positions or adjusting stop-loss levels from a trading perspective—maintaining losses below the median line is essential if the price continues its upward trajectory. A close above 1.42 is deemed necessary to catalyze the subsequent phase of the advance.
Bear in mind the upcoming US CPI report and the Bank of Canada (BOC) interest rate decision may lead to heightened volatility. Staying alert around these releases and monitoring weekly closings for directional cues is crucial. For a more detailed exploration of long-term USD/CAD trade levels, review the latest Canadian Dollar Weekly Technical Forecast.
Key Economic Events Impacting USD/CAD
Economic Calendar - Focus on the latest economic developments and key upcoming releases.
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Authored by Michael Boutros, Sr. Technical Strategist
