Analysis from Capital3x: USDCAD indicating we are in 2008


CAD has been as a good a proxy of world growth as anything else. USD/CAD double bottom and breakout is now indicating and outright dollar rally as some of our premium subscribers were alert on Sept 7,8,9.

Dollar reversal from parity levels have been contained above the 55 and 200-day Moving averages, at 0.9783/.9721, suggesting that the pair has established a significant long-term bottom at 0.9400. On the upside immediate resistance levels are 1.0042 and the 1.0058. USD/CAD has now reached parity but still remains below the 50% retracement of the 2010-11 decline at 1.0042 and the 1.0058 January high. Should the latter level eventually be overcome and two New York daily closes above it be made, the 1.0109/1.0139 resistance area will be in play.

Support levels lie at 0.9830 and 0.9783/.9721.

As long as 1.0000/58 caps, though, the July-to-September support line at .9851 is expected to be retested. Further support comes in around the 8th of September .9830 low and between the 200- and 55-day moving averages at .9783/.9721.”


USD/CAD Daily charts
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The daily charts are showing a clear double pattern at .9450-.9475 over a period of four months. It has then broken above the range resistances at 0.9900. We believe an important bottom has been put and we are headed higher. Our daily trades from now on will features USDCAD prominently as we try playing the trend/pattern of few months if not weeks.

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The pair has cleared the cloud resistance .9650-.9700 and is clearly leading the cloud with upper boundary of the cloud coming in at .9730-.9750. Any correction should be limited.

USD/CAD Weekly charts
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On the weekly charts, things need to firm up. The prices are advancing and have crossed over the 50WMA and now should advance to 1.02 (100WMA). More importantly Stochastic(5day) are strongly poised for some strong gains. Vortex indicator has a positive crossover which thus stressed our bias to a trend.

Dollar Charts (Monthly)
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The above USDCAD charts are in line with the overall theme of dollar bullishness as dollar picks up just in time for October 2011 (Remember October 2008?). All technicals are pointing to monthly breakout rally. This could be a preparation for FED QE announcement in Sept/Oct or their is genuine strength in US dollar due to deposit outflow out of EU banks. A worried Geithner is already on an unusual trip to Germany to meet EU finance heads.

But it is vital to note the USDCAD rallies off a strong dollar. So if the geometric pattern of 2008 is to repeat itself, we could see a similar rally for the USD/CAD, simply put and that will be disastrous for world markets.

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Capital3x Research

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