A very choppy final session of trade for the month thus far, with the whipsaw price action hurting short-term spec accounts on both sides. However, the USD appears to be winning out now, as talk of massive London fix related demand is being confirmed. The much weaker than expected Q4 GDP result has helped to fuel additional USD buying, as the flight to safety trade comes back in full force on Friday, with all markets confirming the elevated risk aversion (see calendar for other releases which were more or less as expected). Even the Yen and Swissy have found renewed flight to safety buying as those correlations fall back in line. The USD Index has now ascended to the highest levels since April 2006 which also could be a contributing factor to the broad USD strength. Dollar/Cad has been generating a lot of attention this mornig with the pair finally breaking out of a massive multi-week triangle formation. Finally, market sentiment has been weighed down on the back of the news that Citi will be receiving more government cash after yet another $9B write-down.
Aud/Cad – While it is premature at this point to call an official triangle breakout in Usd/Cad, the pair does look like it is poised to make a move to the upside, following today’s bullish price action, and this could ultimately help to prop the Aud/Cad cross rate into the coming weeks. Aussie has shown relative weakness against the USD, while Cad has more or less been locked in sideways trade. As such, the bullish triangle breakout in Usd/Cad should ultimately bolster the cross.
A closer look at price action in the cross confirms, with the formation of a bullish outside week. We will be looking for a break back above the current weekly high into the early week, to open the door for fresh upside back to retest initial medium-term resistance by 0.8365, with a further acceleration seen on a break towards the 2009 highs from early January at 0.8690. The current weekly low by 0.7985 is now seen supporting on dips, with only a break back below to negate.
Written by Joel Kruger, Technical Currency Analyst for DailyFX.com
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