[Dan]

Sell USD/CAD 1.1095
Target 1.0500
Stop 1.1300

Covered short USD/CAD position at 1.1050 yesterday as the CAD came under broad pressure and the USD strengthened; price action looked positive for USD/CAD yesterday with a firm close coming after a number of failed attempts to push under the 1.08 area earlier in the week. Follow through buying has been limited, however, with the USD struggling to sustain yesterday's rally - particularly against strong medium term technical resistance in the low/mid 1.11 area.

With the Bank of Canada policy meeting providing only the gentlest of rebukes against the recent CAD appreciation and the underlying USD/CAD trend still fundamentally lower (relatively stronger structural position for Canada, no CE/QE policy in prospect for Canada, firm commodity prices, USD diversification), here to re-enter a short USD/CAD position.

Given the extended move lower over in the USD over the past few weeks and the shallow correction in the USD/CAD bear trend we have seen so far, there remains a chance that the USD stages a more significant rally in the short term. USD/CAD 1.08 area represented the top of a wide "congestion" zone from 2007 so we are not entirely surprised that the USD slide stalled around this point. This is a high risk position, in other words, but still there is the near term potential on the downside extends to 1.0465 (1.30/1.17 double top target) and, USD/CAD parity is within reach by year end.

[Dan]

There has been an awful lot of chop in USD/CAD over the past day or so but the short term structure at least looks pretty weak and, with the market failing (so far) against key weekly resistance points in the low/mid 1.11s, the broader outlook remains negative. Hourly rejections of the 1.1145/50 area and the break under the intervening low at 1.1021 sets a rough double top on the hourly chart, which targets a measured move to 1.08 – essentially a retest of yesterday’s lows; the sell off may accelerate below 1.0974. Still think the near term technical objective is 1.0465, based on the bigger picture 1.30/1.17 double top though and still prefer to sell rallies.