Traders can’t stop shorting the loonie as the U.S. economy improves while Canadian statistics continue to weaken. With a more accommodative Bank of Canada, the loonie may weaken towards the 1.1200 area now that the 1.10 barrier was taken out last night.
Price action on the weekly chart highlights a new 4-year high on USD/CAD. This recent round of unrelenting strength is likely to continue as taper size and speed expectations grow for the Federal Reserve. Higher highs however may only target point D of the potential bearish Gartley pattern, which currently resides at the 1.1230 level. A strong confluence of resistance may also come from the 50.0% Fibonacci retracement of the noted March 2009 peak of 1.30 to the July 2011 low of .9405.
The trade: Buy USDCAD at 1.1000 with a stop loss at 1.0950 and a take profit at 1.1190. The Risk/Reward Ratio is just under 1:4
Edward J. Moya
WorldWideMarkets Online Trading