[LehmanBr]

Canadian Thanksgiving Day and a veritable feeding frenzy. News on Friday that Canada is adding about 30k jobs a month over the last two months and the UE rate has dropped 0.3% to 8.4% sent the USDCAD rate through important psychological (and technical) barriers at 1.05 and then 1.04. This is a breakout from a narrowing wedge of prices for all of 2009. Usually it’s the steeper side of the wedge that breaks and so the market was very cautious about getting short USDCAD at such low levels. That changed when the Australians hiked rates. Canada brought rates much lower that Australia last year and so has more room to tighten. A stronger currency, however, achieves some of that tightening, forcing the higher costs onto Canadian customers. Par seems to be the conservative target. When the CAD breaks through the 200-week or long-term moving average it can trend for an extended period. In the late 1970's when the US was paying its Vietnam War bills the CAD traded around a 0.9900 average.

GBP weakened sharply over the weekend, taking out overhead resistance at 0.9300/EUR. The BIS, acting for unnamed Central Banks, has actively defended that level. A flag higher suggests a retest of the year's high at 0.95 with possibility of revisiting par.