CAD : Reaching for Support

(Wed, 4 Nov 2020). The Canadian Dollar is up more than 1.2% against the US Dollar since the start of the week / month with USD/CAD plummeting towards the October lows hours ahead of the first votes are counted for the US Presidential Election. The move takes price into the lower bounds of a multi-month range contraction with major event risk still on tap this week. These are the updated targets and invalidation levels that matter on the USD/CAD price charts.

CANADIAN DOLLAR PRICE CHART – USD/CAD DAILY

Technical Outlook: In last month’s Canadian Dollar Price Outlook we noted to be on the lookout for, “basing this week with a breach above this formation needed to shift the focus higher.” A near-term breakout last week fueled a rally of nearly 2.4% off the October lows before failing at confluence resistance at 1.3384-1.3409 into the close. USD/CAD has now covered the entire October monthly range in just four day and leaves price within the confines of a multi-month consolidation pattern heading into the US Presidential Elections.

Daily support rests with the late-August trendline with lateral support eyed lower at the 61.8% Fibonacci retracement of the 2017 rally at 1.3056and the August low at 1.3020. Ultimately, a break / close below yearly open support at 1.2975 is needed to fuel the next leg lower in price towards 1.2887. Weekly / monthly open resistance stands at 1.3313 with a breach / close above 1.3409 needed shift the broader focus higher in USD/CAD.

CANADIAN DOLLAR PRICE CHART – USD/CAD 1H

Notes: A closer look at Loonie price action shows USD/CAD breaking below an ascending pitchfork formation today with the August consolidation trendline catching the lows in New York. Initial resistance now back at the 1.32-handle backed by 1.3278 and the weekly open at 1.3313- look for a larger price reaction there IF reached for guidance with a break below 1.3046/56 is needed to keep the near-term short-bias viable.

Bottom line: A near-term breakdown in USD/CAD takes price into the lower bounds of a multi-month consolidation pattern heading into the US presidential elections tonight. From a trading standpoint, a good zone to reduce short-exposure / lower protective stops – be on the lookout for topside exhaustion ahead of the weekly open IF price is heading lower with a break / close below 1.3056 needed to suggest a deeper breakdown is underway. At the end of the day – this is a massive coil in price with the FOMC and US Non-Farm Payrolls still on tap this week. Expect volatility, stay nimble and respect the breaks.

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