USD/CAD's rebound was limited at 1.0231 last week,, below 1.0249 resistance. Subsequent sharp decline pushed it through 61.8% retracement of 0.9799 to 1.0445 at 1.0046. The development indicates that correction fro 1.0445 is going to go deeper. Initial bias remains on the downside this week and current fall could now head towards a retest of 0.9799 key support level. On the upside, above 1.0105 minor resistance will turn intraday bias neutral and bring recovery. But break of 1.0231 resistance is needed to indicate near term reversal. Otherwise, outlook will remain mildly bearish.
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.