It’s now official, the loonie is in a yucky funk. Old news huh? What to do about the once mighty currency …
The chart below shows proof of this “yuckiness” – a “V” shape on the USD/CAD. V shapes are horrible and hard to trade. And now you look at the thing and boggle your head: is it uptrending? Down? I’m confused?
Fibonacci retracements shows us some light as usual. We are at the 38% retracement; this is possible resistance. There is a bit of long-term falling resistance we are near too … more possible resistance. 1 possible resistance + 1 possible resistance = pretty dang possible resistance, right? So whatever we decide, watch out for going long. But do you really want to sell into this? Despite being down on any long term timescale, trading it short on a 1 year daily chart is hazardous.
The hourly is interesting as usual, though. The only thing to do that makes sense here is buy. Uptrend, flag formation. This may be a situation where if you do see a pop from the flag, you delay entry and wait a little longer than usual to buy – after all, there is that fibonacci line lurking around, and the falling resistance, from the daily chart. Fed interest rate news could be a catalyst for this tomorrow.
As a full time currency trader based in the UK and working for myself, I thought I would add my thoughts to your post. I trade the USD/CAD pair a great deal and have studied the Canadian economy in detail, so I hope the following is useful. Six years after it hit an all time low in 2002 the Canadian dollar has since gained almost 40% against the US dollar and the question everyone is asking is whether this trend will continue, and if so for how much longer. On the economic front, the data presented by the Bank of Canada has continued to indicate a slowdown in growth particularly in the manufacturing sector. Canadian job prospects remain good, which would suggest that the economy is resilient at present to any slowdown. However, with the possibility of a full recession in the US, then further slowing of the Canadian economy is inevitable. In recent months the combination of favourable inflation figures and evidence of weaker growth will, I believe, encourage the Bank of Canada to cut interest rates to follow those in the US, but that these cuts will be small to avoid the possibility of increasing inflationary pressures in the economy. Overall, I believe that the Canadian dollar is unlikely to weaken sharply against the US dollar, but the current position of parity may be difficult to sustain in the longer term and a move back to around 1.10 or 1.15 would seem the most likely target. If resistance is penetrated at 1.15 then the Loonie could weaken further.