Canadian Dollar Price Forecast:
Canadian Dollar Price Outlook: USD/CAD Weakness May Persist
USD/CAD lost ground this week, falling from resistance overhead and reversing much of the gains it suffered at the turn of the month. As a result, the pair has established yet another lower-high, a sign US Dollar weakness may persist in the weeks ahead. With analysts considering the prospect of a negative Federal Funds rate and a modest recovery in crude oil prices, the fundamental landscape appears to be shifting further in the Canadian Dollar’s favor.
USD/CAD Price Chart: 4 – Hour Time Frame (March 2020 – May 2020)
This favor is nothing new as USD/CAD has slowly bled lower following its meteoric rise in March but the themes at hand could translate to another string of losses for the pair. With that in mind, the series of lower-highs speaks to simultaneous weakness on the technical side and a break beneath recent lows around 1.3855 would be a major step in forming the next stint lower. As it stands, a successful hold above the level could see USD/CAD rebound somewhat, but a series of topside barriers will look to keep gains contained.
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These levels look to exist around 1.4013 and 1.4069, but likely lack serious influence in the broader trend and may only influence price on an intraday basis. That being said, the most substantial threat to a sustained US Dollar rally is the descending trendline derived from the series of lower highs which currently stands slightly beneath 1.42. Until that level is breached, recent price action suggests further USD/CAD weakness may continue – in my opinion.
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Thus, traders should view a break beneath support at 1.3855 as a bearish development for the pair that could open the door for further losses and potentially see USD/CAD test subsequent support around 1.3810. However, bulls may fight to stave off an extension lower, so choppy price action or even a modest rebound off 1.3855 is not out of the question. A jump to resistance overhead may make short opportunities more attractive from a risk reward perspective, but is likely a mere speedbump in the longer road lower. To see if capitalizing off a potential retracement fits your trading style, take our quiz to find out what type of trader you are.In the meantime, follow @PeterHanksFX on Twitter for updates.
–Written by Peter Hanks, Analyst for DailyFX.com
Contact and follow Peter on Twitter @PeterHanksFX
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