Commentary on the AUD/USD and USD/CAD

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Christoph Lahrs, one of our long-standing members at www.forexmentor.com, has been waiting for the AUD/USD to go down. He thinks we are topping out. “There is plenty of great divergence going on MACD and Stochastics on the daily and 4 hour charts.” “This afternoon (today, Tuesday, 6-26-07), the drop is being blamed on dropping of commodity prices. This should also be good for the CAD trade.” Of course, I’ve been saying for the past couple of weeks that I think we are at a bottom on the daily chart for the USD/CAD pair. The fundamentals seem to support such a notion.

The only thing left that could potentially affect price action for the pair would be the rumoured rate increases that the BoC has to decide on. The Governor of that central bank is getting a lot of heat to keep a lid on rates. But, he maintains that his sole objective is to keep inflation in check – manufacturers be dammed. We’ll see how resolute he is in his convictions. Either way, the market seems to have already discounted the possibility of any tightening on his part. So, I don’t know what else could put a damper on the recent strength in the USD/CAD pair.

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Commentary on the USD/CAD

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The USD/CAD pair is holding its own – still trending up! The Governor of the Bank of Canada said recently that the Canadian dollar (loonie) had risen too far, too fast – not supported by fundamentals. The film industry is hurting because of the high Canadian dollar, and nowpressure is being brought to bear on the Governor (Dodge) to not raise interest rates. That would further exacerbate the problem. Gotta get out of Dodge.

A common sense trendline underneath price action on the daily chart for this pair clearly shows price action on the rise, with no let-up in sight. Either of two things have to happen now – price has to break the 30 EMA convincingly, or price has to retest the low formed by the hammer 17 candles ago on the daily chart. I’m still of the opinion that we’ve seen bottom on this pair. Only time will tell, but I’m betting I’m right, and have put my money where my mouth is.

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