USDCAD - We have been watching USDCAD since it tested below its parity at 0.9975 last week. While the pair is biased to the downside in the medium to long-term, a major barrier to that trend continuation is the 1.0000 level, its parity level. Note that most times a big psycho level such as this one does not give in on an initial test. This means several bounces/failed tests often occur at those levels, though we have seen exceptional cases where a currency pair will blow through a big psychological level like this one. Having said that, we have built two scenarios as the pair approaches the 1.0000 level again. The first is, if the pair continues to hold and trades above the 1.0000 level, chances are that a base could be forming for a recovery higher. This will open upside risk towards the 1.0219/04 levels and the 1.0301 level, its Mar 26'10 high as well as its Feb 22'10 low at 1.0368. The second scenario will be an eventual break and close below the 1.0000 level propelling USDCAD further lower towards its July'08 low at 0.9818 and the 0.9707 level, its Feb'08 low and possibly the 0.9500 level, its psycho level. It is decision time for the pair. Note also that one of the scenarios above must prevail no matter what price action does at the 1.0000 level.