Chart of The Day USDCAD

USDCAD Potential Reversal Zone & Probable Price Path

USD: With positive news about vaccine research, market risk appetite continues to rise. Risk currencies generally made good ground, the US dollar index closed down 0.1% to 92.6, down for three consecutive trading days. U.S. 10-year Treasury bill yields rebounded by 1 point to below 0.91% Preliminary analysis data shows that 94.5% of the 30,000 testers of this vaccine are effective in preventing infection with the coronavirus. Further safety studies will be conducted and emergency use permission from the US Food and Drug Administration will be sought. Fed Vice Chairman Clarida said that the committee discussed the asset purchase plan at the November interest rate meeting and assessed how to use the plan to support the FOMC's goal of maximizing employment and price stability. Former Federal Reserve Chairman Yellen said that fiscal policy plays a key role in supporting economic recovery. She has not denied her intention to run for the post of Treasury Secratary in the next government.

CAD: The CAD is playing familiar ranges broadly range-bound more generally (1.30-1.34 covers the near-to-medium outlook for funds) in the current environment. However, rising virus cases across the country, but especially in the prairies, suggests Canada is being hit especially hard by the second wave; Ontario Premier Ford said Friday that the province was “staring down the barrel of another lockdown”. Virus developments may weigh on CAD sentiment. After a week devoid of data releases last week, we get more fundamental news this week; today’s Manufacturing Sales for September are expected to rise 1.5%; CPI (Wednesday) and Retail Sales (Friday) are the data highlights. Again, the data may have a marginal impact on spot rates but data surprises (positive and negative) have not had much lasting effect on the CAD.

From a technical and trading perspective, USDCAD continues to grind lower in a well defined technical decline, subdividing into a potential 5 wave sequence. As 1.3423 potential 4 wave high holds then bears will continue to target a cluster of targets sited at 1.2740/1.2610 these represent equality objects versus wave 1 and another equality objective versus the 1.3177 swing high. Price looks poised to develop the terminal wave 5 decline in a descending wedge pattern as highlighted in the chart above. Near term bearish exposure should be rewarded on a breach of 1.3060 with a 1.28 interim downside objective for this leg, using yesterday's high as a near term invalidation point

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