Strategy19 February 2014

USD/CAD – maintain longer term bullish bias

Near term weakness viewed as corrective only.

We maintain that the USD/CAD chart is bullish longer term. It has completed a large base between 1.0660 and 0.9403, this base took almost 3 years to complete, and the pattern broke higher earlier this year. It offers an upside measured target to 1.19 longer term. Given that the base took 3 years to complete, this target is achievable in approximately half of that time, i.e. by Q2 2015. We should therefore see the Canadian Dollar come under pressure throughout much of this year.

Our initial upside target of 1.1187/1.1244 has been met, this is the 1991 low and the 50% retracement of the move down from 2009-2011. The setback that we have seen from here is viewed as corrective only and we look for the slide to terminate between 1.0930 and 1.0750 and the market to resume its bull move (these are Elliott wave counts taken off the daily and weekly charts). The previous high charted in 2011 at 1.0660 is expected to offer strong support also, however key support remains the 1.0408 2012-2014 uptrend – while above here a longer term upside bias is maintained.

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