USD/CAD Weekly Outlook

USD/CAD finally broke out from the five month range last week and dived to as low as 1.0154. The strong break of 1.0205 low invalidated our view and in turn indicates that whole medium term down trend from 1.3063 is still in progress. Initial bias remains on the downside this week and further fall should now be seen to 161.8% projection of 1.0779 to 1.0369 from 1.0679 at 1.0016 next, which is close to parity. On the upside, in can of recovery, break of 1.0322 is needed to indicate that USD/CAD has bottomed out in near term. Otherwise, outlook will remain bearish and further fall is expected.

In the bigger picture, the strong break of 1.0205 support (2009 low) confirms that whole down trend from 2009 high of 1.2063 is still in progress and has resumed. Next medium term target will be 100% projection of 1.3063 to 1.0784 from 1.1723 at 0.9444. We'll now stay bearish as long as 1.0779 resistance holds.

In the longer term picture, bullish convergence condition in monthly MACD suggests that 0.9056 (2007 low) should be an important bottom. Meanwhile, fall from 1.3063 is not displaying an impulsive structure so far and we'd continue to prefer that it's a correction. However, such correction from 1.3063 is somewhat much deeper than expected. The overall outlook is a bit mixed and we'd stay neutral for the moment before the pair finally clears out the picture.

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