Tuesday, May 5, 2009

canadian dollar trend -- search of the day

30 percent of the hits to this blog the last couple days have come from searches like this:

canadian dollar trend

they are all coming to this little post I wrote earlier in the year:

Thursday, January 29, 2009
three month Canadian dollar trend

now it is very rare for an individual blog post to get more hits in a day than the main page of the blog, yet this interest in the Canadian Dollar has been going on now for a couple days. my inclination is to view this as a contrary indicator, but let's examine the trend in CAD to be sure.

the weekly chart here shows that the rate has entered into a zone of resistance around the intersection of the .245 lateral retracement and the .3247 speed line. in the event this doesn't hold, I would expect extremely stiff resistance around 87/88, possibly in the next three to five weeks.

looking at the uptrend the last couple months we see a pretty clear five wave pattern. but, you Know, it's not a very nice looking wave formation if you ask me. wave five is about the same size as wave one so far, while wave three was noticeably smaller than one and five. that should be regarded with at least some suspicion.

there is a possibility that the entire advance could end up as a seven wave retracement. if so then near-term support would be expected in the 82/83 zone followed by another rally up as high as the 87/88 resistance identified on the weekly chart above.

in summary, I think there is the potential for the Loonie to gain somewhat more ground against the Greenback, though I am inclined to view the last couple months as a bear market rally. if/when the world economy tails off into a secondary deflation, CAD is gonna get whacked pretty good.

Update 21:46 PM: I forget to insert the short-term chart in the original post. this has now been corrected.