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.