USDCAD is dropping after a bearish evening star candle formation on the daily chart (circled that on the chart below). Last week I blogged about the ending diagonal or descending wedge on this chart—it's outlined in blue. I would expect the upper line of this formation to serve as support at .9815 or the pattern will be invalid. However, to get there it must drop below the .9838 prior low. That would be a bearish signal so selling is likely to push it further down. How much further down could it go? .9753 is the price at the bottom of the downward sloping rectangle; the Feb. 2008 low was .9711; the triangle that began in May has a target of .9549. Then, of course, there is the gruesome 2007 low of .9058 but I don't think we have to worry about that just yet. Still, unless the dollar begins some sort of miraculous rally, the pair could be seeing .9549 if it breaks below .9815/00. If so, one would want to sell on a rally, perhaps to .9916.
Here's the daily chart:
© Dianne Fecteau, 2011. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
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