CAD : Rally to Resistance

(Wed, 23 Dec 2020). The Canadian Dollar is off more than 1% against the US Dollar since the start of the week with USD/CAD mounting the first major counter-offensive off technical support. The recovery keeps price within the broader downtrend and we’re looking for a more significant inflection in price on a stretch higher into yearly open resistance. These are the updated targets and invalidation levels that matter on the USD/CAD price charts heading into the close of the year. Review my latest Strategy Webinarfor an in-depth breakdown of this Loonie technical setup and more.

CANADIAN DOLLAR PRICE CHART – USD/CAD DAILY

Technical Outlook: In my last Canadian Dollar Price Outlook we noted that, “we’re looking for a possible near-term low in price closer to downtrend support,” as USD/CAD plummeted into the December open. A test of the lower parallel on building momentum divergence held the lows days later with breach back above the October 2018 low at 1.2782 fueling a larger recovery in the US Dollar.

The breach of the median-line of the descending pitchforkformation extending off the September / October highs keeps the focus on confluence resistance at the upper parallel / 2020 yearly open / December open at 1.2975/94- a breach / close above this threshold is needed to suggest a more significant low is in place with such a scenario exposing the 61.8% Fibonacci retracement at 1.3057 and longer-term channel resistance at the November swing high near 1.3172.

CANADIAN DOLLAR PRICE CHART – USD/CAD 240MIN

Notes: A closer look at Loonie price action shows USD/CAD breaking / testing the median-line as support with the advance now approaching confluence resistance at 1.2975/94 – be on the lookout for inflection off this zone. Initial support now back at 1.2884 backed by 1.2783/96- a break below this threshold would suggest resumption of the broader downtrend towards the yearly low-day close at 1.2695 and the 78.9% retracement at 1.2619.

Bottom line: USD/CAD has rebounded off downtrend support with the recovery now approaching multi-month downtrend resistance. From a trading standpoint, look to reduce long-exposure / raise protective stops on a stretch into yearly / monthly open resistance at 1.2975/94- be on the lookout for inflection there for guidance IF reached with a breach / close above needed to suggest a larger Loonie price reversal is underway. Ultimately a close below 1.2782 would be needed to threaten another run at the lows. Review my latest Canadian Dollar Weekly Price Outlook for a closer look at the longer-term USD/CAD technical trade levels.

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