US Dollar to Canadian Dollar - February 18th 2009 Daily Chart

US Dollar to Canadian Dollar - February 18th 2009 Daily Chart

Yesterday, at long last, we saw a breakout from the pennant pattern of the last few weeks, and not in the direction I was expecting I have to be honest, with a wide spread up bar on the day, which broke thorough the upper line of the pattern. Now before we all rush in and open long positions on the strength of one candle, let me advise caution ( I know this is very boring but sometimes I do now what I am talking about!). First, this is one candle and we never trade on the strength of just one, unless it is combined with Western indicators as we have seen in the euro vs dollar today. Second, this could be a re-test of the 1.3000 region, which if so would be the third attempt at this level. My suggestion therefore is to wait and see, and in particular we should now be looking for a signal to trade short, should the pair attempt to breach the 1.3000 region. The signals to look for are three candle patterns, bearish engulfing signals, shooting stars or major dojis, but the key will be the price reached and if this aligns with previous positions. So for now we must wait and look for trading opportunities elsewhere, but it is encouraging that at least we have broken out from the dull sideways movement of the last period.

The only fundamental news out today in Canada is Wholesale Sales, which is a relatively minor piece of data  and is the annualized number of new residential building permits issued during the previous month. The forecast is for a decline t -2.2% from a previous of -1.6%. It is however an excellent gauge of future construction activity because obtaining a permit is among the first steps in constructing a new building. The other news out today is in the US, and this is covered in detail for you on the euro to dollar site.

The short term and medium term outlook is sideways, and the long term is bearish.