[Dan]

USD/CAD – the situation here underscores the still significant downside risks facing USD/CAD in the medium term. The daily chart does show channel support under pressure at 1.0938 today and a rebound from there could be quite pronounced, given the largely correction free run lower seen since the 1.18 area. As noted previously, however, the underlying trend (as reflected in various
trend momentum indicators) remains well entrenched across multiple time frames and that – usually– means little or no significant counter trend corrective movement at all. There is little in the way of significant support points below the
1.1105/55 area now (which becomes important short term resistance) until we enter the 1.04/1.08 congestion zone. We continue to target 1.0465 as the measured move target of the 1.30/1.17 medium term double top – but there is also a large degree of overshoot potential building up here.

[Jason_Lim]

USD/CAD has pierced a number of key support levels this week, including 1.1111 (equivalent to CAD 90 cents) as well as a descending channel base at 1.1025. To compound matters, we note that a monthly close below a long-term support
trendline at 1.1125 today would also indicate that longer-term sentiment is beginning to shift in favour of the CAD. Although valuations have moved to oversold levels, retracements to resistance at 1.1190 and 1.1313 are expected to attract selling interest for a test of support at 1.0862. Secondary support is
located at 1.0587 – which is 76.4% retracement of the November 2007-March 2009 advance. Note that the current downtrend will remain valid while prices trade below 1.1484.

[Jason_Lim]

In the midst of the economic and financial turmoil, oil prices sank. This and intense concern about the global economic outlook weighed heavily on longer-term oil prices. However, the December 2010 oil price contract is back above US$70/b. They have not been above US$70/b since the end of November 2008, and are now up 35% from the US$53.7/b low from mid-February. Meantime, USD/CAD was 1.20 to 1.25 in late November, and has now broken below 1.10. Thus, as with other “glimmers of hope,” longer-term oil prices suggest that fear is easing and that the global economy will in fact recover at some point, weighing on USD/CAD. However, the global economic backdrop remains sufficiently worrying to question
the strength of demand and the sustainability of US$70/b.