What’s driving USD/CAD short term are points 1.1703, 1.2247, 1.2977 and 1.3067. Each average is not only severely oversold but current price at 1.3083 literally sits dead on the line. What restricts CAD are longer term averages that remain from CAD’s rise. Those averages are found at 1.0600 and 1.0800. Tops in those averages are seen at 1.3515, 1.3446 and 1.3256. Yet CAD not only has ability to fly far higher due from shorter term points but a FED Funds rate hike would assist the BOC in its desire to see USD/CAD higher. The break lower at 1.3067 and 1.2977 suggests a deeper correction. Its do or die for USD/CAD.
USD/CAD currently sits at 1.3083 and the best target higher is 1.3224 and 1.3269. The current bottom is found at 1.3030. Price must pass 1.3200 with ability to remain above to build supports below and to relieve uncertainty in its current price.
I deviate from past norms because i like CAD for its volatility and a volatility that surpasses USD/CHF and USD/JPY. Further, I like USD/CAD for its current price position above 1.3067. The potential higher is immense. I recommend longs to target the vicinity of 1.3200 but then to re evaluate CAD’s position at 1.3200. What nullifies USD/CAD long is a break lower at 1.3067. Yet other than a quick day trade, I wouldn’t be interested to hold CAD short for any length of time particularly as the range becomes restricted between 1.2977 – 1.3067.
Brian Twomey, Inside the Currency Market, btwomey.com