USDCAD broke above near-term downslope resistance late last week with the subsequent rally now approaching initial resistance targets. The focus remains higher while above near-term structural support but heading into tomorrow’s Canada Employment report, the immediate upside bias may be at risk.

USD/CAD Daily Price Chart

USD/CAD Price Chart - Daily Timeframe

Technical Outlook:Inmyanalyst pick earlier this week I noted that a USD/CAD, “breakout of a near-term descending channel formation has fueled a rally in the pair with advance now approaching a key area of near-term resistance at 1.2579-1.26. This region is defined by the 2018 open, the 38.2% retracement & the 100-day moving average and converges on the 50-line of this near-term ascending pitchfork.”

Price is now testing this level as resistance as daily momentum struggles to mount 60. The immediate long-bias may be vulnerable while below this level near-term. A breach / daily close above this resistance threshold would constitute a break of the monthly opening-range and would be needed to keep the long-bias intact.

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USD/CAD 240min Price Chart

USD/CAD Price Chart - 240min Timeframe

Notes:A closer look at price action sees Loonie trading within the confines of an ascending pitchfork formation extending off the January lows with the rally now resting confluence resistance around the1.26-handle. A breach above this threshold (daily close) would keep the long-bias in play targeting the 61.8% retracement at1.2663 backed by the upper median-line parallel around ~1.2715.

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Interim support rests at the median-line /1.2500/07 with a break below this level risking a larger setback towards the weekly opening-range lows / lower 50-line at1.2398. Bottom line: USD/CAD is testing a near-term inflection point and we’ll be looking for a definitive reaction tomorrow to offer further guidance. From a trading standpoint, I’ll favor fading strength tomorrow should price spike into the upper parallel OR look to short bounces with a break below the median-line /1.25.

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USD/CAD IG Client Sentiment

USD/CAD IG Client Sentiment
  • A summary ofIG Client Sentiment shows traders are net-long USDCAD- the ratio stands at +1.56 (60.9% of traders are long) –bearishreading
  • Retail hasremainednet-long since Jan 25th; price has moved 1.4% higher since then
  • Long positions are2.2% lower than yesterday and 11.9% lower from last week
  • Short positions are 0.8% higher than yesterday and 18.1% lower from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USDCAD prices may continue to fall.Retail is less net-long than yesterday but more net-long from last week and the combination of currentpositioning and recent changes gives us a further mixed USDCAD trading bias from a sentiment standpoint.

See how shifts inUSD/CADretail positioning are impacting trend-Click here to learn more about sentiment!

Relevant USD/CAD Data Releases

USD/CAD Economic Calendar


Other Setups in Play

- Written by Michael Boutros, Currency Strategist with DailyFX

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