USD/CAD dropped sharply to as low as 1.0079 last week before forming a temporary low there and recovered. The development indicates that choppy recovery from 0.9891 is already finished at 1.0522. Fall from there should be resuming the whole decline from 1.0656. Hence, while some sideway trading might be seen initially this week, we'd expect upside to be limited by 1.0304 minor resistance and bring fall resumption. Below 1.0079 should send USD/CAD through 0.9891 towards 100% projection of 1.0656 to 0.9891 from 1.0522 at 0.9757 next. However, break of 1.0304 will dampen this bearish view and turn focus back to 1.0522 resistance instead.

In the bigger picture, a medium term bottom is in place at 0.9406 and price actions from there could either be consolidation to fall from 1.3063 or the third leg of the whole consolidation pattern from 2007 low of 0.9056. We're favoring neither case as USD/CAD is holding above 55 week EMA but limited below 55 month EMA. Having said, firstly, we'd expect 0.9406 to hold for a while at least. Secondly, the eventual pattern of the price actions from 1.0656 would decide whether rebound from 0.9406 is going to extend higher, or USD/CAD is just gyrating in range. We'll stay neutral first until the pattern from 1.0656 finishes.

In the longer term picture, there is no clear indication that the long term down trend from 2002 high of 1.6196 has reversed even though bullish convergence condition was seen in monthly MACD. Current development dampens the case that fall from 1.3063 is resuming the such down trend. But there is no change in the long term bearish view so far. A break of 0.9056 low is still anticipated after all the consolidative price actions complete.

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