Technical Analysis: CAD, January 7

Nicole Elliott from Mizuho Corporate Bank at 01/07/10

Comment: November’s record futures volume, almost double 2008’s average which in turn was roughly six times the norm for 1980-2000, underlines the fact that many are attuned to the relative values of these two bringing heavy speculative activity. During this period bearish pressure has been low but relentless. A weekly close below 1.0400 should add to this setting off the next leg lower where our target remains at C$1.0000 and then an overshoot to C$0.9200. Note that since floating the strongest ever for the loonie against the greenback was 2008’s 0.9059.

Strategy: Sell on a weekly close below 1.0400; stop above 1.0880. Add to shorts on a weekly close below 1.0200 and again on a sustained break below 0.9975 for 0.9800 and then levels as above.