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USD/CAD, USD/CHF Going Down

Thu, Sep 20 2007, 22:17 GMT
by Mihai Nichisoiu

Mihai Nichisoiu

On September 12th I published here on FXstreet.com the following notes:

'In my letter to clients of August 1st - as the USD/CAD was spiking up to 1.0700 (the pair would later surge to nearby 1.0900) - I was writing:

'I'll stick to my idea, graphical representation of the last few days via a USD/CAD daily chart does not look to me as a notable turnaround.

I know the following makes room for a certain bias - still, I wonder whether the USD/CAD is going to experience a '2B bottom' appearance in form of a far more complex inflection stage.'

I have eversince repeatedly highlighted the above, including in my FXstreet.com notes  - like for example on August 21st:

'What happened in the USD/CAD over the last few days partially confirm both my doubts toward considering late July as a remarkable, swiftly-shaped bottom, and my earlier thinking that a '2B bottom' might be developing in the pair.'

The USD/CAD yesterday finally was sold down under the 1.0500 level. It has dropped right under 1.0400 today. As for the '2B bottom' scenario, that remains a possibility - although my attention at all times remains focused on recognizing early signs of already happened change of sentiment, rather than anticipating the technical signals themselves.'

Nonetheless, in my letter to clients of September 13th I came to notice:

'The USD/CAD is at these hours testing its July lows - so, the most important part of my one and a half month old forecast has already been confirmed.
However, the other part of that forecast (actually it has stood more as a wondering than a prediction) - referring to the possibility of a '2B bottom' chart appearance bringing on a surprising bullish reversal upon the pair's revisiting its July lows - does not look consistent with 3 different kind of factors: first off, today's price action in the USD/CAD has not been pointing to a notable bullish reversal, which would have been the key prerequisite for a '2B bottom' setup to show off in the first place, secondly, I don't yet perceive a notable point of price inflection in the US Dollar elsewhere across the board, and thirdly, I don't yet perceive a notable point of inflection in the price of oil either.'

And then, I began my letter of last Sunday, September 16th as follows:

'Beware once again of my observation I made about the odds of the USD/CAD market in my letter dated Thursday, September 13th.'

Since September 13th alone, the USD/CAD has dropped for about 350 pips.
I still don't perceive a notable point of price inflection in the pair. Nonetheless, I continue to believe that the eventual appearance of such a point of price inflection may create a trading opportunity of remarkable reward / risk characteristics - and thus, the USD/CAD is to remain on my list of regular observance.

In my letter to clients dated September 7th I was noting:

'Two of my latest market calls were strongly backed up by today's market action: the USD/CHF testing again its long-term horizontal support at 1.20 - 1.19, and the reloading pressures in the USD/CAD which still point downward despite the fact the pair still holds.
I believe both markets still have room to go down.'

Further on, on September 10th I was adding:

'There are a few market events to still watch for.
First off, whether the USD/CHF will be sold under 1.18 - as for the time being the bearish pressures, I believe, remain considerable.
Secondly, whether the bears will get stronger yet again in the USD/CAD - bringing the prospective bulls close to a long position of remarkable reward/risk characteristics.
With data now at hand, I continue to believe the two above described scenarios have a very good chance to come into reality.'

The USD/CHF moving nowadays under the 1.20 - 1.19 supportive 'line in the sand' has been followed over the last 24 hours by the pair sinking right under 1.18.

Published on  Thu, Sep 20 2007, 22:25 GMT