Canadian Dollar Tumbles, DailyFX Analysts Give Their Picks From The Crosses
Since USDCAD marked a significant, bullish breakout through the Wednesday's US session, the Canadian currency seems to have found selling pressure across most of its counterparts. Is this decline the signal for a much more intense trend going forward or will it be retraced like so many other start-and-stop moves? Read what each of our DailyFX anlaysts believes and how they are positioning below.
Currency Strategist - John Kicklighter
My picks: Pending AUDCAD Breakout
Expertise: Combining Money Management with Fundamental and Technical Analysis
Average Time Frame of Trades: 3 days - 1 week
AUDCAD has been a frequented pair for me. I have been waiting for a breakout from this for some time - and have taken advantage of the very mature range in the interim. In the Pairs To Range Trade report yesterday, the AUDCAD was once again the topic of conversation; but the article also suggests that any congestion move would be considered over a very short time frame. This is the case because this pairs is now forming a horizontal range between 0.7850 and 0.8125 at the end of a notable wedge. With volatility still abnormally high, such boundaries cannot hold. From a fundamental standpoint, there are few major pieces of event risk scheduled to cross the wires over the coming week from either country; but the Canadian dollar has already come under significant selling pressure all over the market. Interestingly enough, so has the Aussie dollar. The match momentum will diverge eventually and AUDCAD will make its move - perhaps on tomorrow's Canadian CPI numbers.
For the setup, a higher time frame wedge is already breaking. The ceiling in the pair is cut from a faling trend from the July 29th high. The important level now is 0.82 which represents the 38.2% retracement of the July to October bear wave and 50-day SMA. The support to the wedge is the rising trend from October 9th, though this level has already found an intraday push. Range support and a 50% retracement mof the October 9th to 22nd reversal calls a hard floor at 0.7825/40. A confirmed break beyond either of these levels can finally signal a breakout.
Currency Strategist - Terri Belkas
My picks: Short AUD/CAD
Expertise: Fundamentals Combined With Technicals
Average Time Frame of Trades: 1 - 3 Days
I was wildly wrong in my pick from yesterday, and I know exactly why. It was because I went against one of my own rules of not trading against the greater trend. Thus, I'm going to go with a trend trade today, and this is actually my pick from last Thursday with a few revisions: short AUD/CAD. This trade is based more on technicals than anything else, and looking at the consolidation of AUD/CAD below trendline resistance and within a range of roughly 0.7850-0.8100 , I think we'll ultimately see the pair break lower. Potential targets include the psychologically important 0.75 level while market-wide declines in carry trades could trigger losses down toward the 10/8 low of 0.7218. Stops should be placed a little wider than I initially indicated, perhaps above the November 10 high of 0.8220.
Currency Analyst - David Rodriguez
My picks: Long USD/CAD on a break of resistance
Expertise: System Trading
Average Time Frame of Trades: 2-10 weeks
Last week I wrote that I would buy the USD/CAD on a break of key resistance at the 1.2420 mark, and yesterday's break confirms my bullish bias. I think that the pair will continue its upward momentum. Subsequent resistance comes in at the 78.6 percent retracement of the same move at 1.2690, but I envision a re-test of recent mult-year highs above 1.3000.
Currency Analyst - Ilya Spivak
My picks: Long USDCAD between 1.2550-1.5270
Expertise: Macro Fundamentals, Classic Technical Analysis
Average Time Frame of Trades: 1 week - 6 months
USDCAD has broken above the range top at 1.2470, a key multiple support/resistance level and the 14.6% Fibonacci retracement of the 11/07/07-10/27/08 rally. This opens the door for a long position aiming at the previous top above 1.30. Look to go long between 1.2550-1.5270, with a stop-loss at 1.2168 below the 11/18 wick low, to initially target 1.3015, the 10/28 high. This is a "soft target", meaning look to 1.3015 as the next key juncture but expect USDCAD to rise substantially higher in the long term.
Currency Analyst - John Rivera
My picks: Long USD/CAD
Expertise: Fundamentals Combined With Technicals
Average Time Frame of Trades: 2-4 Days
The outlook for the global economy is sinking fast and so is the expected demand for raw materials which will weigh on demand for the "loonie". We are also seeing the dollar buoyed by risk aversion flows which leads me to expect further gains for the USD/CAD. A re-test of the 10/28 high of 1.3020 seems well within reach, with a break of resistance there leaving 1.3500 as the next target.
Currency Analyst - David Song
My picks: Long USD/CAD
Expertise: Fundamentals and Technicals
Average Time Frame of Trades: 2 - 10 Days
Fading demands for the commodities paired with risk aversion favors a bullish outlook for the USDCAD, and we may see the pair work its way back to the October highs over the following week as risk sentiment continues to drive price action in the currency market. After reaching a high of 1.3020 in October, the pair pulled back to find short-term support near 1.1460-70 at the beginning of the month, but has surged higher during the last 24 hours of trading to cross above 1.2423 (61.8% Fib level of 1.1463-1.3020). Over the following week, we may see the pair test 1.2693 (78.6% Fib level of 1.1463-1.3020), and a break above this level could lead the pair to test the 10/28 high of 1.3020 over the stated timeframe.
DailyFX
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