[cppene]

USD/CAD – Price action looks distinctly positive for the CAD, even if the currency has given back a little strength so far today; we have previously noted that the consolidation in USD/CAD through August was a potentially USD-negative development, with the market forming a bear “wedge” consolidation after the move down from 1.17 to 1.06. A clear break of 1.0780 suggests a resumption of the underlying trend lower. In addition, after the rejection of the 1.11 area in late August/early September, we can also interpret price action as having formed a short term double top (trigger at 1.0721). The bear wedge formation implies a measured move target of 0.9690/00 over the next 2-4 months while the double top breakdown implies a short term downside target of 1.0320. We would prefer to see the support points for these formations clearly compromised (daily close) to support these conclusions; but we consider the main directional risk for USD/CAD to be clearly lower at the moment anyway. We think minor corrections are liable to be limited to the 1.08 area for the moment and consider 1.0880/90 to represent
important short term resistance ahead of trend resistance at 1.1041. Sell rallies.