[Dan]

Overnight Spot Trading Activity: Stock Taking
Asia: USD/CAD drifted lower to an intraday low of 1.1476 as sentiment remained unchanged for most of the session after last weeks’ strong increase in risk appetite. Although risk aversion seeped back into the market very late in the session, buyers of USD/CAD remained cautious pushing the currency barely above 1.1500. USD/CAD closed the session well below the first key resistance level at 1.1557.

London: The London session was characterised by more aggressive buying as risk sentiment continued to deteriorate. USD/CAD rallied from a session low of 1.1485 to 1.1553 before selling interest emerged. However, sellers only dominated the market for a short period. USD/CAD again retested resistance at 1.1557 later in the session but failed to break above the level. However, momentum currently favours an eventual break of this level which could open the way for a test of 1.1630.

Limited Event Risk Today – Focus on Equities and Bernanke
Attention has shifted back to equities and underlying risk sentiment swings ahead of a very quiet data day today. The U.S data calendar has nothing to offer today, but Fed Chairman Bernanke will be speaking on bank stress tests in Georgia tonight. Following news reports the Fed significantly scaled backed the size of capital needed by banks that failed the stress test, the market will pay close attention to the speech. In Canada, the March New Housing Price Index will be released, but this release is not considered a market mover.

Expected Trading Range
1.1540 – 1.1640

Short-Term Outlook: Retracement Resistance Located at 1.1630 and 1.1785
Valuation–driven retracements to resistance at 1.1630 and 1.1785 are expected to attract short-term selling interest for a move to initial support at 1.1545. An hourly close below this level would then highlight 1.1456.

Medium-Term Outlook: Secondary Target at 1.1661 Hit; Next Key Support at 1.1477
With resistance now located at 1.1661 and 1.1794, the current downtrend features 1.1477 and 1.1313 as the next key support levels to watch. The daily studies offer a more cautious tone as they have moved to oversold levels – but a retracement phase will not be confirmed until we close above 1.1794.

CAD Crosses – Short-Term Outlook:

EUR/CAD: Bullish Breakout Above 1.5652 Overnight
EUR/CAD has broken above the descending channel resistance at 1.5652, opening the way for further moves higher. With the descending channel pattern broken, selloffs to 1.5592 and 1.5547 are expected to attract buying interest for a move toward resistance at 1.5733. An hourly close above this level would sustain the uptrend and target 1.5767.

GBP/CAD: Downtrend Remains Firmly In Place
GBP/CAD remains in a downtrend after the cross declined further overnight. This indicates that rallies to resistance at 1.7558 and 1.7691 should attract renewed selling interest for a re-test of the overnight low at 1.7384. An hourly close below this level would sustain the downtrend, targeting 1.7309 thereafter.

CAD/JPY: Bearish Breakout Below 85.53
CAD/JPY was unable to sustain the recent rally and broke below 85.53 overnight, bringing an end to the recent uptrend. With the uptrend broken, rallies to resistance at 85.53 and 85.92 are expected to attract selling interest for a test of initial support at 83.89. An hourly close below this level would then target 83.12.