The U.S. dollar has made four big moves higher in the past four days. In the process, USD/CAD has risen above downtrend resistance and the mid-July highs. At the moment, the USD is overbought so we would advise waiting for a down day to establish long positions.

The RSI, at 68.42 is nearing the same levels as the spike high in May and if recent history proves correct, we will likely see a move lower (possibly back to as low as 1.04) before we see a renewed push higher.

Fundamentally, there is a similar story about to play out. The Bank of Canada meets September 6 and the market is pricing in a 45% chance of an interest rate hike. We expect that economic worries and market jitters will force the Bank of Canada to reconsider raising rates. At the moment, 100% of economists survey expect the BoC to raise rates. With recent Canadian economic data trending lower and no inflation worries, the BoC is likely to change course. Alternatively, they make hike rates by 25 basis points but make it clear that there will be no further rate hikes. In either case, the Canadian dollar will weaken (and USD/CAD will rally).

We expect to see 1.13 at some point before the end of the year.

North American markets got a big boost from news that BHP Biliton had proposed a $37 billion takeover of Potash Corp. The takeover suggests corporations are willing to invest and spend, something that has been up for debate. Companies have been hoarding cash, unwilling to hire or invest due to the uncertain economic environment. If the move by BHP is the start of a trend, it will signal growing corporate confidence in the worldwide economy – something that will boost AUD and CAD.

There is a downside bias as USD/CAD consolidates in a wedge formation. A drop below minor support at 1.0305 would point to further losses for the U.S. dollar against its Canadian counterpart.

For the Australian dollar, the candlestick patterns are bullish in the short-term but a buy signal won’t be confirmed until 0.9081 is breached. With Asian markets risk averse at the moment, there may be good value in establishing longs if AUD/USD drifts toward 0.9000.

Despite its status as a growth currency, the Canadian dollar is holding up relatively well early in this week’s trading. To us, this looks more like a reflection of a slumbering, mid-summer market than any reflection about Canada’s economic strength.

Usually, the Canadian dollar moves in tandem with the Australian and New Zealand dollars but we’re not seeing that today. Instead, USD/CAD is chopping close to unchanged. Typically, when European and North American traders get to their desks, the pair will play catch-up. This is especially the case at this time of year when many traders are on vacation. That makes it a great time for independent traders to front-run the market.

On a daily charting basis, CAD  is carving out a wedge formation. Friday’s bullish hammer reversal candlestick points to further gains but they may be capped at psychological and downtrend resistance at 1.0494 – 1.0500. We feel like this chart is gearing up for a huge move but it may take some time to develop.

USD/CAD attempted to break down below support yesterday but was harshly rejected. The fresh uptrend has continued in today’s session and the technical outlook is looking increasingly bullish.

We can see a rough outline of a hammer reversal pattern yesterday and a more clearly defined hammer today. Support comes in at the 100-day moving average (purple) along with the Jule low of 1.0277 and uptrend support from the low in April.

Initial resistance resides at the 200-day moving average (red) but we don’t think that will pose a serious hazard to bulls. Instead, look for an inital rise to downtrend resistance at around 1.0570. Place stops below the 100-day moving average as another test below will likely see follow through.

The sell-off in USD/CAD following the Bank of Canada decision didn’t make any sense to us and now the technicals are setting up for a move higher.

We have seen an intraday reversal on daily chart that could finish the session as a bullish hammer reversal pattern. The caveat is the 50-day moving average (purple) that comes in at 1.0444 today.

If that breaks, expect a move to 1.0680, at least. The bottom today puts in a higher low and is well above the most recent 1.0277 low.

The U.S. dollar inched higher yesterday against CAD and that continued in Asia-Pacific trading but the optimistic Chinese day quickly wiped out the USD rally.

We continue to advocate establishing longs with tight stops. This market is very indecisive but with Stochastics offering a strong buy signal and support at 1.0288 holding, we see the risks as heavily skewed to the upside.

Our first support level is the band between 1.0288 and 1.0294 that’s followed by 1.0139. There is resistance at 1.0395.

One week ago, we talked about the potential for USD/CAD to rally and that is exactly what has happened. The initial catalyst was a soft report on Canadian retail sales but the broader move has been driven by international worries about a double-dip recession.

We noted that Canadian fundamentals remained strong but when we looked at the chart, it was clear the U.S. dollar wanted to go higher against CAD. What happened? We have rallied from 1.0393 to 1.0639.

The 200-day moving average has given way, downtrend resistance was only a hiccup and we are nearing our initial target of 1.0678. We would take profits on longs initiated below 1.0450 because we think there will be some consolidation here. We see a push to 1.0650 in the coming day but expect that to be the top for the next 2-5 sessions. Initiate shorts at 1.0650 or look for a pullback toward 1.0550 as an opportunity to establish fresh longs for a push toward our eventual target of 1.0850.

We were surprised by the power of the rally in USD/CAD today. USD was weak on most crosses after a dovish FOMC statement but the Canadian dollar was swamped by soft data on retail sales.

From a fundamental perspective we maintain our bearish USD/CAD stance. The market had only the faintest hope of eventual FOMC rate hikes ahead of the meeting while Canadian retail sales have risen in 12 of the past 14 months. Today’s miss is just a blip in a strong trend.

From a technical perspective, however, we want to be long USD/CAD. We might see a slight pullback in the hours ahead but we will be looking to buy. Here’s how the daily chart looks.

USD/CAD has rallied in three straight sessions. We breached the 200-day moving average and several other resistance levels today. We are partially wary of downtrend resistance but don’t see it as a major hurdle. The RSI is neutral and oil also broke down today.

We like the upside for a test of 1.0679 and perhaps 1.0853.

Yesterday we talked about cutting gold long and waiting for better levels to buy. What happened? Gold fell 1%. We still look for more attractive levels and will be buying at $1200 and continuing to evaluate any moves to the upside.

Today, we are struggling to find a clear trend to latch on to. The charts are not sending a great deal of clear buy or sell signals. Nowhere is this more clear than in USD/CAD.

We don’t see anything here that is sending a clear, short-term signal. We know that the long-term trend is down but we are seeing some sideways indications lately and we’re worried about another push to 1.08.

USD/CAD probed the downside today but we had a sound rejection well above support at 1.0333. That move has got us thinking about entering into a long position but we don’t see the right risk/reward ratio. We could see a track up to 1.0580 or 1.0600 but on the downside we want to see 1.0333 broken before we get bearish.

Looking at other charts, it’s similar. There is not a great deal of momentum anywhere. We take that as a signal that the market is unsure. Traders are looking for clear reasons to buy and sell.

In the day ahead we have the ECB and BOE interest rate decisions. That could be a catalyst. Our bias is that risk aversion is on the way up. Stock markets were set up for a nice move higher today but wilted. We will wait for clearer signals.

First, we would like to update yesterday’s post. We noted that USD/JPY was gearing up for a big move and that is exactly what happened. We were cautious on the early move (especially since we had a slight bias to the downside) but once the news that Japan’s Prime Minister quitting hit, we knew which way this pair was heading. His replacement will likely be Fiannce Minister Naoto Kan, who has been quoted as saying he prefers a weaker yen. It seems as though the technicals and fundamentals are aligning for this trade. A strong U.S. non-farm payrolls report on Friday will likely lead to another leg higher.

The U.S. dollar has been strong today but it has been badly outpaced by it’s northern neighbour as Canada’s loonie has led the forex market. If we get a daily close below 1.0414 we see it as a bearish signal.

The Bank of Canada hiked interest rates on Tuesday but didn’t commit to further rate hikes and we saw a disappointment trade combined with a risk averse environment that left a negative technical picture. We were thinking about entering longs but today’s impressive rally in CAD has taken us aback.

We are now back below the key 200-day moving average. The pair is about to hit some significant technical support at the 100dma (1.0330) followed by trendline support and the old range bottom of 1.0205.

Still, we find it very hard to be long USD/CAD after today’s price action. We caution against agressive shorts because today’s move seems so out of the ordinary. A close above 1.0414 and we might wade into a long position with a very tight stop. If we close below that level we start looking for ways to short the pair.

USD/CAD was unable to retake the 1.02 handle in two attempts earlier in the week and has once again turned lower. The conditions are now right for further USD/CAD declines and likely a new low.

The move higher in the USD touched off the upper Bollinger Band but was unable to close at that level. With risk appetite looking strong and the potential for a huge bailout for Greece, we think Canada’s currency stands to gain.

The RSI shows absolutely no oversold conditions in the U.S. dollar. Our first target is the cycle low at 0.9936. That will likely be tested in Friday’s session or on Monday. We will be trading this with a very tight stop at 1.01. A rally above there will most likely lead to a third test at 1.02.

USD/CAD has opened the week on the defensive and is nearing a third test of a key level protecting parity.

USD/CAD has been in a clear downtrend for more than a week after popping above 1.03 on a re-test of the old 1.03-1.07 range. That failure set up a renewed push toward parity. That move failed on April 1 as support in the 1.0066 range held.

The inability to break lower generated some buying interest but the downtrend resistance on the hourly chart kicked in and the sellers took charge early in this week’s session in an indication of what is likely to come.

We are now back just above 1.0060. Expect a wave of sellers to push USD/CAD to parity – and eventually beyond —  if this key level breaks.

USD/CAD has formed a short-term head and shoulders reversal pattern that targets a re-test of last week’s low of 1.0060.

The set-up for the Canadian dollar is looking good on Friday’s session. European leaders appear to have cleared up some of the uncertainty regarding Greece and that could lead to a ‘risk-on’ session.

With a stop at 1.0250 and a take profit at 1.0080, this trade has a potential loss of 38 pips and a potential gain of 130 pips so it stacks up right for us. Selling USD/CAD has been a good trade for us all the way down and this is a new, and attractive tactical entry.

We have been pounding away at USD/CAD on this blog for months. We have been almost relentlessly bearish on USD/CAD and the push nearly to parity last week validated our long-held stand.

After the recent three-day relief rally in USD/CAD , the market is set-up for a breakdown.

There are several things working towards a lower CAD:

- U.S. stocks rallied to a fresh 17-month high on Tuesday and the risk appetite trade is looking as strong as it has this year.

- Oil is at $81 and withing range of the cycle high of $83.16. A break higher would undoubtably add to the CAD’s momentum

- Similarly, copper appears ready for a bullish run. It formed a bullish hammer pattern on the daily charts on Tuesday and has been making higher lows.

- On Wednesday, Bank of Canada Governor Mark Carney is speaking in Ottawa. After the twin failures to stay a above 1.02 this week, USD/CAD is set-up for a bearish breakdown lower if Carney signals that the BOC is ready to start hiking rates.

- Further, the technical picture remains moderately oversold but as the Bollinger Bands show, the conditions have been relieved somewhat. We can’t rule out a rebound to 1.0350 or even 1.0400 but we feel like the risk of missing a move to well below parity makes it worth taking. We will be adding to shorts all the way up to 1.04 but would have to start covering above that.

- One thing that gives us pause is the massive short positioning in the CFTC data in USD/CAD. We fear a short-cover rally but we also feared the same thing in EUR/USD and thus far, it has failed to materialize.

The Canadian dollar was the top-performing major currency on Wednesday but we would look to sell the strength.

USD/CAD is the most compelling chart we see among the majors. It has formed a clear double-top bottom on the daily chart and the recent two-day pullback looks like a good entry point.

The double bottom comes in around 1.02 at it was confirmed by the early January rally in the pair. The measured target of the move is 1.15 and that’s where we think this pair is going.

In the shorter-term, we have seen USD/CAD struggle to break above 1.0780 and there is resistance beyond that at 1.0872. These remain as significant hurdles and we will manage risk around them.

On the downside, there is some support at 1.0545 and we will put our stops here. That limits the downside to about 80 pips from the current level with a minimum upside of 140 pips and potentially 900 pips.

Adding to our conviction is the oil chart. We have seen oil bounce after falling on huge volume on Friday. It is now nearing its 100-day moving average at $75.73 and that will be resistance; as will be $77.

Risk assets have improved since Obama took the podium to deliver his first State of the Union address. There was nothing particularily bullish about the speech but stock futures took off, the euro rebounded from below 1.40 and USD/CAD has formed a short-term triple-top.

The parameters of the short-term top are 1.0691 to 1.0591 — a perfect 100 pip range that has been tested three times on the topside and three times on the bottom. The pair is often prone to range trades and we will be keeping an eye on this one because a breakout will likely prove forceful.

On the downside, we have the 100-hour moving average as support as well as the support at 1.0591. We would expect a fall below this support to target at least 1.0500 with 1.0460 as the preferred scenario.

On the topside, the market is facing strong resistance at 1.0750, so we would be prone to taking profits quickly on a breakout. But we would also be eager to buy a break of 1.0750 with 1.0850 as a target.

Overall, we have seen a substantial rally in USD/CAD since falling to 1.02 in the middle of January.  The daily chart shows a nice double-bottom, however, and we would prefer to be buyers as long as it remains above 1.04. We would see a correction to 1.0450 as an ideal buying opportunity.

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We hate to pump our own tires too much but it has been a good week for fxbeer.com and it’s only Wednesday. Our short EUR/GBP call on Monday is up 145 pips and our short EUR/USD call a day ago has been sensational, up 184 pips. In total, that’s 329 pips in 48 hours and while we would certainly take some short-term profits, the trades still look like winners.

Today we’re going to step away from the euro and look to North America. The commodity currencies got hit hard on Wednesday in an exciting day of trading and the most volatile session on the year. The kiwi was the worst-performing currency but the Canadian dollar was close behind and blew through resistance, with USD/CAD rising more than 150 pips.

This move has caught is by surprise as we are big, long-term CAD bulls. We will never fight a chart though and this one has turned against the CAD in a big way.

We can see that the stochasics on the bottom chart are showing a buy signal and the RSI still has some way to go before it’s into oversold territory.

The huge reversal today above key resistance at 1.0406 to as high as 1.0487 is a buy signal. We would have liked to see a close near the highs but still think this move targets 1.0582, and if that breaks, likely to 1.0743 as we re-enter the Nov-Dec trading range.

On the bottom of the daily chart we see that there is now the potential for a double-bottom that could target as high as 1.14. We’re not quiet ready to go there yet because of the price action on Oct. 20 and 21.

You can see a very similar move to the once we saw today on Oct. 20, extending into Oct. 21, when USD/CAD rose to 1.0582 before we saw a minor retracement. The pair eventually rose all the way to 1.0850. We will be keeping a close eye on price action in the day ahead. If we can see a close above 1.0441 we will certainly be encouraged.

In the short-term, look at 1.0406 as support with resistance at 1.0489-1.05. We expect to see some consolidation in the Asia-Pac and European sessions before a convincing move on Thursday (likely higher).

The USD made a valiant effort at staving off parity on Monday, as it rose to 1.04 but it failed precisely where it was supposed to at 1.0406 and has been run over but the CAD in the past day, creating a bearish engulfing candle formation that points to further losses.

Though close, parity isn’t a foregone conclusion. There is support at 1.0253 followed by 1.0207 but a test on those two levels in highly likely in the coming day and a break of 1.02 would make parity almost a slam dunk.

On the upside, the only level that matters is 1.0406. It’s the key resistance line and if USD/CAD can break above it, go with it because it’s probably going to 1.08.

We are in the midst of a powerful reversal in USD/CAD.

After breaking key support at 1.0406 and falling as low as 1.0367, we have seen an immediate and powerful reversal to as high as 1.0578 today — a more than 200 pip move in just over 24 hours.

The reversal has created a bullish reversal pattern on the daily chart.

The final three candlesticks create a textbook hammer reversal pattern that is confirmed by a bullish engulfing candle. Reversal patterns really don’t come any more clearly than this one but further confirmation would come with a close above 1.0509. If that’s the case, a retest of the top of the range at 1.0750 will be the favoured scenario.

The only currency to outperform the U.S. dollar over the past day and the past month has been its neighbour — Canada’s loonie.

The Canadian dollar has been the runaway best performer in the forex market recently has interest rate hikes from the Bank of Canada are priced in and oil regains its footing.

Last week, we talked about how the Canadian dollar was in danger of breaking its recently range to the upside. Instead, in a classic techncial move, it tested the top of the range and rejected it. Instead, it now looks to take out the bottom of the range.

The range we are talking about is 1.0406 to 1.0748 in USD/CAD. On this chart, we can see that it has been in force since the start of November.

We can see that the range has been tested at least twice on the bottom and twice to including last week when it was emphatically rejected.

At the moment, we think it’s highly likely that the bottom of this range will be tested. The momentum is clearly on the Canadian dollar’s side. Wednesday saw the release of Canadian GDP data that was disappointing yet the Canadian dollar still made gains — that’s the sign of a strong trend.

If we look at the clear rejection of 1.0750 as a double top, then the measured target is a move down to 1.0070. Of course we will need to see a break of the December low for that to happen.