USD/CAD Weekly Outlook

USD/CAD rose further to as high as 1.0779 last week and the break of 1.0744 resistance affirms our view that three wave correction from 1.0851 has already finished at 1.0223. Nevertheless, subsequent sharp retreat from 1.0779 indicates that a short term top might be formed. Initial bias will be neutral this week and some consolidations should be seen first. Though, downside is expected to be contained by 1.0544 support and bring rally resumption. Above 1.0779 will bring retest of 1.0851 resistance next.

In the bigger picture, we're still favoring the case that whole medium term fall from 1.3063, which is viewed as a correction to long term rise from 0.9056, has completed at 1.0205 already. Break of 1.0851 will confirm this case by completing a double bottom reversal pattern (1.0205, 1.0223). In such case stronger rally should be seen to 61.8% retracement of 1.3063 to 1.0205 at 1.1971 at least. Also, in such case, we'll tentatively treat rise from 1.0205 as resumption of the whole up trend from 2007 low of 0.9056 and focus on the structure of the rise from 1.0205 for confirmation.

In the longer term picture, the three wave structure of the fall from 1.3063 to 1.0205 revived the case that it's a correction to rise from 0.9056. Sustained trading above 61.8% retracement of 1.3063 to 1.0205 at 1.1971 will indicate that whole rise from 0.9056 might be resuming for another high above 1.3063.

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