9 Jul 2013
Flash: USD/CAD correction looms – TD Securities
FXstreet.com (New York) - The USD/CAD traded briefly above 1.0600 Friday before slipping back modestly, notes the TD Securities Team.
“Despite still positive trend dynamics (higher highs and higher lows over the past week) and bullish momentum signals, the USD rally looks a little over-extended on the short-term (6-hour) chart. Note the clear divergence in the short-term oscillator signal and the spot rate over the past week.
“This is a development that typically heralds an overbought market—and one therefore prone to a correction. We look for limited weakness (high 1.04s/low 1.05s at most) and for the USD to remain well-supported on dips for the moment.” the team adds.
The USD also looks to be struggling somewhat on the daily chart. The market is pressing right up against daily trend channel resistance in and daily slow stochastic oscillator signals are also flashing overbought, Underlying trend momentum here remains strongly USD-bullish across a range of timeframes so we retain a bullish bias overall. However, “the risk of a correction looms quite large over this market now. We think near-term corrective USD losses should be limited but weakness below 1.0421—key support now—will trigger a deeper pull back. Monitor for clearer signs of a short-term top/reversal.”
“Despite still positive trend dynamics (higher highs and higher lows over the past week) and bullish momentum signals, the USD rally looks a little over-extended on the short-term (6-hour) chart. Note the clear divergence in the short-term oscillator signal and the spot rate over the past week.
“This is a development that typically heralds an overbought market—and one therefore prone to a correction. We look for limited weakness (high 1.04s/low 1.05s at most) and for the USD to remain well-supported on dips for the moment.” the team adds.
The USD also looks to be struggling somewhat on the daily chart. The market is pressing right up against daily trend channel resistance in and daily slow stochastic oscillator signals are also flashing overbought, Underlying trend momentum here remains strongly USD-bullish across a range of timeframes so we retain a bullish bias overall. However, “the risk of a correction looms quite large over this market now. We think near-term corrective USD losses should be limited but weakness below 1.0421—key support now—will trigger a deeper pull back. Monitor for clearer signs of a short-term top/reversal.”