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Currencies CAD Top Trade Idea for October 8th , 2014 – USD/CAD

forex_logoWe focused in on the prospects for USDCAD last week, arguing that bulls could look to target the 5-year high at 1.1275 based on the strong technical and fundamental backdrop (see “USDCAD: Up, Up, and Away!” for more). As it turns out, Friday’s strong Non-Farm Payroll report served as the catalyst to drive the pair to that barrier before Monday’s broad-based US dollar pullback took the pair back down to 1.1100. Now the pair is quietly gaining momentum again, helped along by an abysmal Canadian Housing Permit reading yesterday.

The technical picture for USDCAD remains as bullish as ever. One tool that can help evaluate the underlying strength of a price move is to measure the depth of the retracements. In a strongly trending market, counter-trend moves are typically small (< 50% of the previous move), whereas in more balanced markets, larger retracements are the norm (50-100% of the previous move). Using Fibonacci retracements as a frame of reference, Monday’s dip in USDCAD was only about 38.2% of the September rally, suggesting that bulls remain in control, especially if bulls can burst through resistance at 1.1275.

Looking beyond just the exchange rate itself, the secondary indicators are still bullish for USDCAD. The MACD continues to trend higher above its signal line and the “0” level, showing bullish momentum, while the RSI remains in bullish territory but not yet overbought.

As we noted last week, a break through resistance at 1.1275 would expose the inverted H&S measured move target at 1.1325, though even further gains would be likely in time. Meanwhile, any dips that emerge are likely to find support at the 50-day MA (currently 1.1000 and rising), and the medium-term bullish bias will remain intact as long as rates hold above that support area.


About Matthew Weller

matt wellerMatt Weller is a Senior Technical Analyst on’s research team. Matt creates regular research reports focusing on technical analysis of the forex, equity and commodity markets. In his research, Matt utilizes candlestick patterns, classic indicators, and Fibonacci analysis to anticipate potential market moves.

In addition to his regular research reports, he has discovered a passion for teaching others about trading and has conducted over 1200 educational webinars on different aspects of trading and trading psychology. His analysis has been quoted in the Financial Times, Reuters, MarketWatch, and the Wall Street Journal. Matt is a Chartered Market Technician (CMT) and a member of the Market Technicians Association.

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