Analysis: A Sign of Broader USD Strength or Just a Rogue Move?
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We have been looking for a resumption of the broader USD uptrend in place over the past few months. It has so far failed to materialize with many currencies now trading at or near multi-week highs against the Greenback. One of the few pockets of USD strength has been against the Canadian dollar with USD/CAD trading to its highest levels in almost a month on Wednesday. The 1.0425/40 resistance area tested on Wednesday looks quite significant from a Fibonacci perspective as it marks a clear convergence of various key retracement levels including the 50% retracement of the July range, the 38% retracement of the mid-June to July advance and the 78.6% retracement of the decline from the 2011 high to the 2012 low. Normally against such a strong resistance zone we would be looking to sell, but with the broader trend still bullish and the cycle picture now turning positive the zone looks like a clear upside pivot that should spark a bout of decent upside momentum if it is overcome. We like buying USD/CAD on a stop just over today’s high of 1.0445.
USD/CAD Daily Chart: August 7, 2013
Charts Created using Marketscope – Prepared by Kristian Kerr
Key Event Risks in Coming Sessions:
LEVELS TO WATCH
Resistance: 1.0425 (Fibonacci),1.0440 (Fibonacci)
Support: 1.0385 (Fibonacci), 1.0345 (Week-to-date-low)
STRATEGY – Buy USD/CAD on a Stop over 1.0445
Entry: Buy on a move through 1.0445
Stop: 1-day close below 1.0385
Target 1: 1.0550
Target 2: 1.0600
--- Written by Kristian Kerr, Senior Currency Strategist for DailyFX.com
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