USD/CAD dipped to 1.2450 last week but quickly recovered. Initial bias is neutral this week first. On the upside, above 1.2687 will extend the rebound from 1.2246 to retest 1.2919 key near term resistance. On the downside, below 1.2450 will target 1.2246 first. Break there will extend the fall from 1.2919 and target 1.2061 keys support level.
In the bigger picture, the rebound from 1.2246 is mixing up the medium term outlook. Nonetheless, USD/CAD is staying below falling 55 week EMA, hence, the bearish case is in favor. That is, fall from 1.4689 is not completed yet. Sustained break of 1.2061 key support will carry larger bearish implication and target 61.8% retracement of 0.9406 to 1.4689 at 1.1424. However, firm break of 1.2919 will revive the case of medium term reversal and turn outlook bullish.
In the longer term picture, 50% retracement of 0.9406 (2011 low) to 1.4689 (2015 high) at 1.2048 remains a key support level to watch. As long as this level holds, we’ll treat fall from 1.4689 as a correction and expect another rally through this level. However, sustained break of 1.2048 will turn favors to the case that rise from 0.9056 (2007 low) is a three wave corrective move that’s completed at 1.4689. And retest of 0.9056/9406 support zone could be seen in medium to long term.
