Despite rebounding to 1.0362, USD/CAD failed to sustain gain and indeed dropped sharply towards the end of the week. The development indicates that correction from 1.0445 is not over yet. Initial bias remains on the downside for 1.0159. Break will target 100% projection of 1.0445 to 1.0159 from 1.0362 at 1.0076 next. But we'd expect strong support from 61.8% retracement of 0.9799 to 1.0445 at 1.0046 to bring rebound, at least on first attempt. After all, we're still favoring the case for rise from 0.9799 to continue. Though, break 1.0362 resistance is needed to signal completion of the correction from 1.0445 first.

In the bigger picture, correction from 1.0656 is finished with three waves down to 0.9799 and rise from there is resuming the medium term rebound from 0.9406. Such rise from 0.9406 is either a correction to fall from 1.3063 or the third leg of the whole consolidation pattern from 2007 low of 0.9056. In either case, USD/CAD should target 38.2% retracement of 1.3063 to 0.9406 at 1.0803 first and possibly further to 100% projection of 0.9406 to 1.0656 from 0.9799 at 1.1049 before completion. Break of 0.9799 support is needed to invalidate this view or we'll stay bullish even in case of deep pull back.

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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