USD to CAD - Daily Candle Chart 10th March 2009

USD to CAD - Daily Candle Chart 10th March 2009

We were right to be cautious in our trading approach and despite a wide spread up bar yesterday once again we saw a failed attempt by the US dollar to hold above the 1.3 level and in early trading this morning the pair are trading lower by almost 200 pips.  If this failure is confirmed later today then this will be the fourth failed attempt in the last 5 months to penetrate this price level.  So once again I have to advise you to be patient and wait for the trading signals to appear.

All the moving averages are suggesting a move higher but until this is confirmed by a firm breakout above the 1.3 price level then I would suggest you do not enter any long positions for the time being.

Despite last week’s cut in interest rates by the Royal Bank of Canada to 0.5% the Canadian banking system is proving remarkably resilient to the problems suffered elsewhere.  Canadian banks are typically leveraged at 18:1, in other words there are 18 dollars of debt to every one of equity, whereas the US banks are typically at 26 to 1 and the Europeans at an extraordinary 61 to 1, which gives you some idea of why Euroland, in particular, is suffering so badly.

Strict regulations and a conservative lending culture have made the Canadian banks the envy of the world.  This could partly explain the tension that we are seeing in the daily candle chart and the apparent strong resistance to a move higher by the US dollar.

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