USD/CAD – 1.2797
The greenback has surged after finding good support at 1.2450 last week, adding credence to our bullish view that low has been formed at 1.2061 and mild upside bias remains for this rise to bring retracement of recent decline, hence further gain to 1.2925-30 (50% Fibonacci retracement of 1.3794-1.2061), then towards psychological resistance at 1.3000, however, reckon upside would be limited to 1.3090-00 and price should falter below 1.3130-35 (61.8% Fibonacci retracement), bring retreat later.
We are keeping our view that the wave b from 1.0657 (a leg top) has possibly ended at 0.9633 with (a): 0.9800, wave (b): 1.0447 and wave c at 0.9633, the subsequent rise from there is now treated as wave c exceeded indicated upside target at 1.3770-80 and 1.4000 and wave (3) has possibly ended at 1.4690 and wave (4) correction has commenced for retracement back towards 1.2000.
On the daily chart, our latest preferred count remains that the A of (B) rally from 0.9059 low (7 Nov 2007) unfolded into an impulsive wave with i: 0.9059-1.0380, ii ended at 0.9819, iii at 1.3019 followed by triangle wave iv at 1.2026 , then wave v formed a top at 1.3066 and also ended the wave A. The wave B is unfolding as an double three a-b-c-x-a-b-c and is sub-divided as a: 1.2192, b: 1.2716 and wave c at 1.0784, followed by wave x at 1.1725, another set of a-b-c unfolded with 2nd a at 0.9931, 2nd b at 1.0674. the 2nd c has possibly ended at 0.9407, therefore, consolidation with upside bias is seen for major correction, indicated target at 1.3900 had been met and gain to 1.4700 would follow.
On the downside, whilst initial pullback to 1.2695-00 cannot be ruled out, reckon downside would be limited to 1.2635-40 and previous resistance at 1.2599 (now support) should contain downside and bring another rise later. A daily close below this level would suggest top is possibly formed, bring weakness to 1.2540-50 and possibly 1.2500 but said last week’s low at 1.2450 should remain intact, bring another rise later.
Recommendation: Buy at 1.2610 for 1.2850 with stop below 1.2510.
Longer term – The selloff from 1.6194 (21 Jan 2002) to 0.9059 (07 Nov 2007) is viewed as (A) wave which is a 5-waver as labeled on the monthly chart as below, the subsequently rally is labeled as (B) with impulsive A leg of (B) ended at 1.3066, wave B of (B) is unfolding which has either ended at 0.9407 or would extend one more fall but downside should be limited to 0.9200 and 0.9000 should hold.