USD/CAD Update by FXA.com (ForexHound.com)

USD/CAD is chopping from yesterday’s test of resistance at the rising trendline since early Dec (currently at 1.0375/90). Note too that the market has had a tough time building on the gains after the break above the Dec 14th high at 1.0250 (poor momentum, at least so far), is near term overbought after the last month of gains, and appears to have completed at least a temporary top

USD/CAD is chopping from yesterday’s test of resistance at the rising trendline since early Dec (currently at 1.0375/90). Note too that the market has had a tough time building on the gains after the break above the Dec 14th high at 1.0250 (poor momentum, at least so far), is near term overbought after the last month of gains, and appears to have completed at least a temporary top (see shorter term chart at www.fxa.com/solin/comments.htm ). This suggests at least a few days/week of consolidating but may be part of a larger rising wedge since Oct (potential topping pattern), and would suggest a final push to the ceiling after (see “ideal” scenario in red on daily chart). For now would fade the extremes of the pattern, buying an approach of the base (currently at 1.0075) and shorting an approach of the ceiling (currently at 1.0375/90), but with the expectation of a downside resolution a few weeks ahead. Nearby support is seen at 1.0210 (yesterday’s low) while resistance above the ceiling is seen at 1.0475 (50% retracement from the Feb high at 1.1875). Note in the Dec 18th email, said a 400 tick retracement was overdue and shorted at 1.0125 before tumbling to reach a low at .9760 (365 tick) about 10 days later.
 
Longer term, the view remains unchanged as the Nov spike down to .9060 (also bullish “false break” of the base of the 3 ½ year bearish channel, see weekly chart/2nd chart below) may have completed the whole decline from the Jan 2002 high at 1.6185, with at least another 12-18 months of gains after. However, still waiting for a confirmation that a bottom of that magnitude is in place (clear 5 waves higher), while the potentially bearish view on the shorter term (rising wedge, topping pattern) also raises questions/risk in regards to potential that such an important bottom is in place. 
 
David Solin
Partner, Foreign Exchange Analytics
[NP][/NP]

Foreign Exchange Analytics has it's roots in both the emerging information technologies and the global economy that characterized the last two decades.  As currency transaction volumes soared in the wake of the 1985 Plaza accord, the need for timely concise information on what forces were driving and would drive exchange rates became critical.   David Gilmore was one of a new breed of analyst that saw a void of relevant, market moving... More