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Guest Commentary: Upcoming Week for the USD/CAD – March 27 2011

Guest Commentary: Upcoming Week for the USD/CAD – March 27 2011

2011-03-28 21:46:00
Cory Mitchell, CMT, Technical Strategist
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Upcoming Week for the USD/CAD – March 27 2011

Places to put limit orders this week

Buying USD:

0.9800, 0.9780, 0.9750 (aggressive), 0.9720 (aggressive)

Selling USD:

0.9815, 0.9830-40, 0.9910, 0.9940 (aggressive)

Why:

The tabling and vote of non-confidence by the opposition in the Canadian government spurred a late day rally on Friday, erasing losses from Thursday. Last week the rate was contained within a range - a low of 0.9730 (support) and a high of 0.9844.

The longer-term price trend continues to point lower, but indicators such as the MACD are showing a bullish divergence. As the USD has made lower lows versus the CAD the MACD has been making higher lows, showing a lack of momentum and conviction in the downward moves.

A rally above the 0.9973 would be an indication of a turning point in the pair, but a daily close above 1.00 would tell the real tale. The last close we had above parity was on January 28 where the pair closed at 1.0011 only to fall over the next two sessions.

Figure 1. USD/CAD Daily Chart

Guest_Commentary_Upcoming_Week_for_the_USDCAD_March_27_2011_body_USDCAD_targets-march_27.png, Guest Commentary: Upcoming Week for the USD/CAD – March 27 2011

Source: Freestockcharts.com

The MACD on the hourly chart did not confirm the drop to 0.9730 last week, and is signalling momentum in the USD. A rally above 0.9840 is likely to see continued buying into the higher resistance levels (see Selling USD levels).

The pair continues to trade in a choppy fashion, with momentum failing to be sustained in either direction. This should be remembered when placing trades, as currently this is not a strongly trending pair.

Volatility has broken out and reversed course on the legs of the earthquake in Japan. The daily average (14) range which reached a miniscule 52 pips/day on March 13, has since climbed to 90 pips/day. The breakout in volatility, if it can be sustained, is likely to push the pair beyond the range it has been contained in. Indicators such as the MACD indicate the breakout will be to upside.

High impact news this week:

USD Consumer confidence:Tuesday@ 10 AM EST

CAD Gross Domestic Product:Thursday@ 8:30 AM EST

USD Non-Farm Payrolls & Unemployment:Friday@ 8:30 AM EST

USD ISM Manufacturing:Friday@ 10 AM EST

Have a great trading day!

Written by Cory Mitchell, CMT

Cory Mitchell is an independent trader specializing in short- to medium-term technical strategies. He is the founder ofhttp://vantagepointtrading.com/, a website dedicated to free trader education and discussion. After graduating with a business degree, Mitchell has spent the last six years trading multiple markets and educating traders. He has been widely published and is a member of the Canadian Society of Technical Analysts and the Market Technicians Association.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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