The pair was slightly higher on Monday and recovered a small part of strong losses from Thu/Fri, when the greenback fell over 1.8% against Canadian counterpart in two days. Bearish extension on Friday broke below previous base at 1.2413 and posted fresh 26-month low at 1.2339, last seen at the end of June 2015. Overall picture remains firmly bearish as the pair completed short-term correction from 1.2413 (25 July low) to 1.2778 (15 Aug high), signaling continuation of larger downtrend from 1.3793 (05 June peak). Today’s action is likely to hold within narrower range due to US Labor Day holiday, but the price action may remain choppy and directionless until Wednesday, awaiting for the outcome of Bank of Canada’s policy meeting, which is the key event for Loonie this week. Markets see 50/50 chance for another 0.25% hike after the BoC increased interest rates in July by 25 basis points from 0.50% to 0.75%. Possible scenarios see CAD jumping if BoC hikes and expect Loonie to drop if central bank keeps rates unchanged. Break below Friday’s fresh low at 1.2339 could trigger extension towards 1.2124 (18 June 2015 trough), possibly to 1.2036 (50% retracement of larger 0.9384/1.4688 2011/2016 uptrend) on stronger bearish acceleration. Conversely, fresh acceleration higher may revisit 1.2501 barrier (daily Tenkan-sen) and may extend towards 1.2558 (daily Kijun-sen) on break.
Res: 1.2425; 1.2501; 1.2539; 1.2558
Sup: 1.2374; 1.2339; 1.2274; 1.2188
