USDCAD Remains Trapped In A Trading Range

USDCAD traded higher for a second week in a row the past week maintaining within its established trading range and below its major emas.

Having maintained its multi-year decline off the 1.6168 high (2002 high) to an alltime low of 0.9058 in Nov'2007, USDCAD entered a recovery phase in late Nov'07 and propelled to a high of 1.0249(Dec 14'08 high) before pulling back to close the year at 0.9972.A fresh up leg pushed the pair above its Dec'07 high at 1.0249 to a YTD high of 1.0379(Jan 22'08) before running into a strong resistance at the 1.0342 area(July 24'07 low) in late Jan'08.It has since attaining the mentioned high been trading in a range between 1.0379 on the upside and 0.9712 on the downside.

Figure 1: Weekly Chart

While this continues to persist, pinning a clear direction on the upside or downside is difficult but overall longer term direction remains to the downside suggesting that its current consolidation or range trading is a correction of its multiyear decline now on hold. If a downside break is triggered in such a case, its .618 Ret (0.9058-1.0379 rally) at 0.9562 will be targeted with a turn below there clearing the way for further decline towards its 2007 low/range pattern price target (achieved by measuring the height of the range and projection it from the potential break out point) at 0.9058/36 where a decisive invalidation if it materializes could send the pair into an uncharted tertritory.However,if the pattern resolves to the upside, the bears will have to watch the bulls ride higher initially towards the 1.0471 level, its .50 Ret(1.1871-0.9058 decline) which also falls within the vicinity of a cluster of resistance. Beyond there will bring more gains towards its .618 Ret at 1.0806.USDCAD's monthly and weekly momentum indicators are positive and trending high implying further strength.

Figure 2: Monthly Chart

On the whole, the pair's longer term bearish structure remains in place even as its present effort at recovery is being confined to a range. This view remains valid as long as its May'06 low at 1.0930 and its falling trendline drawn off the 1.5917 high (monthly chart) remain unbroken.

Mohammed Isah Market Analyst
www.fxtechstrategy.com

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