USD CAD Crosses Par, Monthly Trend Turns Higher

For the second time in a month the USD CAD exceeded par indicating a serious shift in investor sentiment. The last time this currency pair visited par in early August, Canadian exporters took advantage of the price and laid out their hedging strategies. This time however it looks as if the U.S. Dollar has the power behind it to blast through this important level.

The absence of economic data on Monday meant that traders focused almost exclusively on sentiment. With the threat of a Greek default looming and rumors of French bank downgrades, global investors continued to sell risky assets, leading to the strong surge in the so-called “safer” U.S. Dollar.

Now that the USD CAD has penetrated successfully the June top at .9912, the tone appears to have turned convincingly to the long side. Although there may be a series of retracements to the downside as this currency pair establishes its support base, the longer-term monthly chart indicates the market appears to be on track for a rally into the downtrending Gann angle from the March 2009 top at 1.3062. This Gann angle is at 1.0662 during September and is moving down at a rate of .008 per month.

A move to 1.0662 during September will mean the global economy is under severe pressure. While it is possible that this level will be reached this month, it is not probable given this currency’s average monthly range. Nonetheless traders should be aware that the monthly trend has turned up in the USD CAD and that there is sizeable upside potential.