CAD : Trade Level

(Thu, 17 Dec 2020). The Canadian Dollar fractionally stronger against the US Dollar into the start of the week with USD/CAD attempting to mark fifth consecutive weekly decline. The Loonie trend has matured and while the broader risk remains titled to the downside, the decline may be vulnerable near-term as price approaches broader downtrend support. These are the updated targets and invalidation levels that matter on the USD/CAD weekly technical price chart heading into the close of the year.

Notes: In my last Canadian Dollar Weekly Price Outlook we noted that a multi-week sell-off in USD/CAD had taken price into the yearly range lows and to, “be on the lookout for inflection here early in the month.” A break below yearly-open support at 1.2975 into the December open fueled a sell-off of more than 2.3% with the decline now testing support at the 2017 December high-week reversal close at 1.2725 / lower parallel.

A break / close below this threshold is needed to keep the immediate short-bias viable heading into next week with such a scenario exposing confluence support at the 2018 yearly open / 78.6% Fibonacci retracement of 2017 advance at 1.2579-1.2619 – look for a larger reaction there IF reached. Initial resistance stands with the median-line (currently ~1.2830s) backed by 1.2975 with bearish invalidation now lowered to the 61.8% retracement at 1.3057.

Bottom line: The USD/CAD breakdown has marked four consecutive weekly declines with the sell-off now testing the first major downtrend support zone. From a trading standpoint, a good zone to reduce short exposure / lower protective stops – be on the lookout for topside exhaustion ahead of the yearly open on recoveries IF price is indeed heading lower. Ultimately a leg lower would have us looking for a larger reaction closer to more significant downtrend support near the 1.26-handle.

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