Forex Technical Update

Previous: USD/CAD At a Resistance Cluster (8/3)


Bottom and Upward Acceleration
- USD/CAD is breaking above the previous resistance pivot at 0.9778.
-  The market held above 0.94, broke above a declining channel, then accelerated upwards after breaking the resistance cluster at 0.9640.
- The 4H RSI has broken above 70, and shows strong bullish momentum in the short to medium term.
- Now if a subsequent throwback is held above 0.9640, the market is likely in a medium term (2-3weeks) rally towards 1.0, parity.
Declining Resistance,and 200sMA in Daily:
- The daily chart shows the market in a sharp V-shape reversal.
- The RSI reading here is breaking above 60. A break above 70 establishes bullish momentum.
- As the market approaches 0.9820, we have the 200SMA. This is also the level of a projected declining trendline. There can be some resistance here.
- If this is broken, the bullish bias grows. However, a true show of a successful bottoming attempt is a break above 0.9913 area, which would form a large double bottom.
USD/CAD 8/4/2011 Daily Chart

Oil (Brent):
Oil Chart 8/4/2011
- Oil is plunging after a break below the 115.00-114.95 support, and the 113.00 pivot. Note the RSI reading held below 60, suggesting that the bearish momentum established in May is still intact, as the market consolidates with a bearish tilt.
- Now, we are falling towards the 200SMA again. Just like the USD/CAD which is climbing towards its Daily 200SMA.
- We can see the clear correlation here between the loonie (CAD) and oil.
- If this oil chart breaks below the 200SMA, and price slides below the 105.00, we can have more confidence in the USD/CAD rally to break above the 0.9915 area, and eventually the parity level.
- The bearish scenario is valid and further confirmed if a subsequent pullback rally fails to break above 113.00. This is analogous to USD/CAD failing to break back below 0.9640.

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Fan Yang CMT
Chief Technical Strategist