USD/CAD Weekly Outlook

USD/CAD rose sharply to as high as 1.3005 last week but failed to take out mentioned 1.2984/3015 resistance zone and retreated sharply on Friday. Short term outlook is turned neutral for the moment. Recent development argues that price actions from 1.3015 is developing into ascending triangle and another fall could now be seen to complete such pattern. Based on this view, fall from 1.3005 should be contained above 1.2125 support. Decisive break of 1.3015 will confirm that medium term up trend has resumed for 61.8% retracement of 1.6196 to 0.9056 at 1.3469. However, a break below 1.2125 will dampen this view and indicates that deeper fall should be seen to retest 1.1464 support before completing the consolidation.

In the bigger picture, preferred interpretation of the up trend from 0.9056 is that first wave rally is completed at 1.0248. Subsequent second wave consolidation was in form of triangle and finished at 0.9823. Rise from 0.9823 is treated as third wave rally and should have completed at 1.3015 already. Subsequent consolidation from 1.3015 is probably in form of triangle. Sustained break of 1.3015 will confirm that medium term up trend has resumed for 61.8% retracement of 1.6196 to 0.9056 at 1.3469. Though, note that sustained break of 1.1464 will indicate that the fifth wave is possibly completed In other words, whole rise from 0.9056 has possibly completed too. Deeper correction should then be seen in such case.

In the longer term picture, the decisive break of 55 months EMA affirms that case that a long term bottom is already formed at 0.9056 with bullish convergence condition in monthly MACD. At this moment, it's too early to conclude how far this up trend will eventually extend to. Nevertheless, note that the impulsive nature of the rise from 0.9056 indicates that the price actions after the rise from 0.9056 completes a five wave sequence will be corrective in nature, and be followed at least another medium term up trend before completing the long term rise.

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