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9 Jul 2013
Flash: USD/CAD pullback to be contained in 1.04/05 area – TD Securities
FXstreet.com (New York) - According to the TD Securities Team, “The USD/CAD continues to consolidate in the short-term.”
Indeed, the consolidation channel in place since last week’s 1.06+ peak on the hourly chart capped the market earlier in the session around 1.0565 and the sharp swing lower now looks to be abating as the move extended below 1.0525, the channel base. “A big, bullish hammer signal formed over the last hour’s worth of trade and, with support in the low 1.05s broadly holding this test, the short-term risk is shifting back to a test of the upper 1.05 area.” the team adds.
The broader pattern of trade still suggests that USD/CAD is over-extended and liable to struggle to push significantly higher at the moment—even if we do see spot rebound intraday. The market is grinding up against the ceiling of the bull channel in place over the past few months and a deeper correction is still possible, or even warranted. “We still rather think that the strength of the underlying trend higher means that short-term USD/CAD losses will remain contained to the high 1.04/low 1.05 area for now. We spot key short-term support at 1.0421 still. Weakness below here opens up the downside for a deeper correction to the 1.02/1.03 range.”
Indeed, the consolidation channel in place since last week’s 1.06+ peak on the hourly chart capped the market earlier in the session around 1.0565 and the sharp swing lower now looks to be abating as the move extended below 1.0525, the channel base. “A big, bullish hammer signal formed over the last hour’s worth of trade and, with support in the low 1.05s broadly holding this test, the short-term risk is shifting back to a test of the upper 1.05 area.” the team adds.
The broader pattern of trade still suggests that USD/CAD is over-extended and liable to struggle to push significantly higher at the moment—even if we do see spot rebound intraday. The market is grinding up against the ceiling of the bull channel in place over the past few months and a deeper correction is still possible, or even warranted. “We still rather think that the strength of the underlying trend higher means that short-term USD/CAD losses will remain contained to the high 1.04/low 1.05 area for now. We spot key short-term support at 1.0421 still. Weakness below here opens up the downside for a deeper correction to the 1.02/1.03 range.”