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Canadian Dollar Price Forecasts: Will USD / CAD Weakness Persist?


Price Outlook in Canadian Dollars:

  • USD / CAD broke under crucial support earlier this week, opening the door for further weakness
  • The greenback is on a fragile footing as monetary policy appears to remain accommodative and Washington politicians discuss new covid stimulus measures
  • Further still, IG customer sentiment reveals USD/GOUJAT could decline further as retail traders remain net

Canadian Dollar Price Forecasts: Will USD / CAD Weakness Persist?

the US dollar bled lower for months following its initial outbreak in the early days of the coronavirus pandemic. With the Fed determined to maintain its accommodative stance and discuss further fiscal stimulus in Washington, the case can be made for further weakness in the USD. On the other hand, a recovering global economy has seen sectors like energy and risk-sensitive currencies like the Canadian dollar recover lost ground.

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Together these themes have helped push USD / CAD down for months and a recent break below crucial support could have opened the door to further losses. To that end, 1.2929 – the low of November 9 – had served as an important level to avoid further losses, but with prices falling below USD / CAD seems vulnerable to a further decline.

USD / CAD Price Chart: Daily Period (September 2018 – December 2020)

USD / CAD price table per day

If the bears are looking to push the pair down, subsequent support is rather sparse up to the 1.2800 area which coincides with the October 2018 swing low. That being said, the USD / CAD has already fallen significantly and some Short-term recoveries are not out of the question. Given the extent to which the USD / CAD has slipped over the past few months, however, earlier support could serve as resistance going forward, making attempts to recover all the more difficult.

USD / CAD price chart: 4 hour period (June 2020 – December 2020)

USD / CAD Price Table

As a result, potential resistance lies around the 1.2952, 1.3000 and 1.3100 levels which have each shown their ability to influence prices in the past – albeit to varying degrees. Nonetheless, the longer term fundamental outlook and recent price trend over the past few months is leading to a bearish bias in my opinion, making USD / CAD a candidate for short exposure despite recent losses.



of customers are net long.



of customers are net short.

Switch

Long

Shorts

OI

Daily -11% -4% -9%
Weekly -14% 9% -9%

As it stands, 1.2800 is a prime area of ​​interest and IG customer sentiment data reveals that retail traders remain long on the net, suggesting that USD / CAD may continue to decline as we generally take a contrary view of crowd sentiment. With the pair posting a new low at the time of this article’s publication, another blow has been dealt to its technical position, but patience may be warranted as a pullback could create possible entry points.

– Written by Peter Hanks, Strategist for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX



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