Canadian Dollar Draws Split Forecasts From DailyFX Analysts

With the financial crisis still grinding on risk appetite and a rebound in commodity prices putting the spring back into comm bloc price action, our DailyFX Analysts are turning their attention to the Canadian dollar. However, with uncertainty abound and strong technicals in place, there is growing debate for short and long-term direction. To see which side of the market each analyst is on, read below:

Chief Strategist - Antonio Sousa

My picks: Remain Long USD/CAD
Expertise: Fundamentals, Volatility and Sentiment.
Average Time Frame of Trades: 1 day to 3 months

I remain long USD/CAD since August and I expect the U.S. dollar to rise further once the market shifts its focus away from the Capitol Hill where the Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson were giving their testimony on the $700bn rescue plan. Indeed, a significant undervaluation of the U.S. dollar is now likely to lead to a substantial improvement of the U.S. Current Account through continued strong export performance. Moreover, lower oil prices should help the U.S. economy by alleviating pressure in the U.S. consumer which makes nearly 70% of the U.S. economy.

Senior Currency Strategist - Jamie Saettele

My picks: Staying USDCAD short (from last week), exit half at 1.01, move risk to 1.0566
Expertise: Technical
Average Time Frame of Trades: 1 month

Keeping in touch with the bigger picture, the rally from .9055 is in 3 waves (corrective). This could be just the first 3 wave move in a more complex move (flat?) or a completed 3 wave correction. In either case, the USDCAD likely heads lower from here. The first support is not until the center of the triangle; at 1.01. Bears can move risk to 1.0566.

Currency Strategist - John Kicklighter

My picks: Long USDCAD
Expertise: Combining Money Management with Fundamental and Technical Analysis
Average Time Frame of Trades: 3 days - 1 week

There is a general uncertainty about the US dollar that has been bourne out of the financial crisis of the past two weeks. While the worst of the impact seems to have passed, the threat is still very real until the US government agrees on a resolution to the crunch that truly eases the burden of illiquid and rapidaly depreciating debt on banks' balance sheet. There are few places in the forex market that can avoid this risk, one pair though is USDCAD. As each others' largest respective trade parnters, the fundamental outlook for both Canada and the US is intertwined. Therefore, this is very important risk factor is somewhat neutralized, which allows us to focus on other fundamentals and technicals.

Fundamentally, the Fed is looking at rate expectations of a one - perhaps two - rate hikes over the medium term. The BoC is looking at one or two cuts over the same period. Technically, this pair has been in a steady rising trend (albeit a choppy one) since the November swing low. With major former resistance at 1.0300/20 and a rising trend from the November swing low around 1.0250, risk is clearly defined. To the upside, 1.0550 and 1.08 have been notable levels for price action for the past two months. However, as of now, there is a tight range between 1.03 and 1.04 that will likely find a breakout rather soon. With spot near support and the risk clearly defined, a trade can follow the developing trend and have a good exit plan.

Currency Analyst - David Rodriguez

My picks: Take partial profits on the USD/CAD Short
Expertise: System Trading
Average Time Frame of Trades: 2-10 weeks

I had been hawking a USD/CAD short position for the past several weeks, and a breakout to the downside finally produced big profits on the trade. That said, a recent bounce at support at the 61.8 percent Fibonacci retracement of the 0.9970-1.0820 move at 1.0300 suggests that we may see a short-term correction before any continued moves to the downside. With that said, I'd like to take partial profits on the position, but keep in mind that a break below 1.0300 would likely lead to a re-test of 1.0000 within the coming weeks of trade.

Currency Analyst - Ilya Spivak

My picks: Pending Long USDCAD
Expertise: Macro Fundamentals, Classic Technical Analysis
Average Time Frame of Trades: 1 week - 6 months

July - September USDCAD rally found resistance at a trend line in play since 2004. The upper boundary was also reinforced by the top of a Rising Wedge formation originating in October 2007 and confirmed by negative divergence with the Slow Stochastic oscillator. The pair yielded an Inverted Hammer on 9/11 and proceeded to sell off, losing 4.68% in the past 10 days. Current positioning sees USDCAD in close proximity to Wedge support. This is reinforced by the price congestion area between 1.0294 and 1.0225 containing the highs of the range that had characterized the pair before the bullish breakout. Look for signs for a forming bottom here to position for a long entry. That said, must keep in mind that a Rising Wedge is typically a reversal chart formation and a breakout to the downside is not out of the question.

For more details on USDCAD and outlook on the other major pairs, please see the latest Candlestick Weekly Report.

Currency Analyst - David Song

My picks: Short AUD/CAD
Expertise: Fundamentals Combined with Technicals
Average Time Frame of Trades: 2 Days - 2 Weeks

I have held a bearish outlook for the AUD/CAD since the beginning of September, and I anticipate the pair to fall lower in the days ahead. Earlier this week, the pair bounced higher to hit an intraday high of 0.8806 on 9/22, but has come back down to hold near 0.8670-0.8680. I forecast the downward trend to drag the pair below 0.8575 in the following week, and may test the 9/18 low of 0.8395 for support on its way to the downside.

DailyFX

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