[AndrewWoo]

USD/CAD – The USD has spent the best part of June correcting the sell off from a little above 1.30 that based just below 1.08 at the start of the month. While the USD’s powers of recovery have proved stronger than anticipated, traders think that the move higher over the past four weeks or so represents a correction rather than a reversal; as such, the USD may well be near an important short and medium term peak. Last week’s rally stalled in the low 1.16 zone, a near pinpoint test of the 1.1655 retracement resistance line; the market appears to have formed a (bearish) rising wedge formation which may be starting to break down; and price action has turned a little choppier over the past week, with neither gains above 1.16 now losses below 1.1450 generating much follow through – this is sometimes a signal of a market in transition from one trend to another. We would still prefer to sell rallies.

[AndrewWoo]

USD/CAD – A bearish key reversal day Wednesday should reinforce the cap on
USD/CAD in the mid 1.16 area (38.2% retracement of the 1.30/1.08 drop); and even though the USD has bounced back well so far today, our conviction that the USD is correcting – rather than reversing – the March/June sell off is a little stronger this morning. Oscillator studies suggest that the CAD is oversold and with such a strong technical reversal signal in place now, we look for more downside progress in funds in the next week or so. A daily close under 1.1445 should see a little more sustained downside momentum in funds build. Above 1.1655 targets the upper 1.17 area.