CAD : At Low

(Thu, 10 Dec 2020). The Canadian Dollar has surged more than 4.6% against the US Dollar since the October highs in USD/CAD with price now probing lateral support at multi-year lows. While the recent breakdown does leave the broader risk weighted to the downside, the immediate decline may be vulnerable here as price approaches downtrend support. These are the updated targets and invalidation levels that matter on the USD/CAD price charts.

Technical Outlook: In last month’s Canadian Dollar Price Outlook we noted that the USD/CAD sell-off was approaching, “key support at the objective yearly open – looking for a reaction down here.” The focus was on a close below 1.2975 to validate a larger break and we got it into the December open. A close below this threshold on the first of the month fueled a decline of more than 1.7% with price now testing lateral support a the October 2018 low at 1.2782- the weekly opening-range is taking shape just above and we’re looking to the break for guidance.

USD/CAD continues to trade within the confines of a descending pitchforkextending off the September / October with daily resistance eyed at the median-line / 1.2887 backed by the 2020 yearly open at 1.2975. Broader bearish invalidation now lowered to 1.3056. A break lower from here keeps the focus on the lower parallel (currently near the 1.27-handle) and the 78.6% Fibonacci retracement at 1.2619.

CANADIAN DOLLAR PRICE CHART – USD/CAD 240MIN

Notes: A closer look at Loonie price action shows USD/CAD trading in a tight weekly range just above lateral support with momentum divergence into the lows threatening a near-term recovery here. The threat remains lower while below the median line with a break lower exposing subsequent support objectives at the lower parallel backed by 1.2663 and 1.2619.

Bottom line: The USD/CAD breakdown has stalled at lateral support and the immediate focus is on a break of the weekly opening-range for guidance. From a trading standpoint, a good zone to reduce short-exposure / lower protective stop – be on the lookout for topside exhaustion ahead of 1.2884 IF price is heading lower on this stretch. Ultimately, we’re looking for a possible near-term low in price closer to downtrend support.

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