CAD, Aussie and Gold Monthly Outlook - September 2011

Weekly Update - September 02 close

USD/CAD

Monthly chart patterns suggest a possible double bottom (2007-2011) and thus a trend reversal could be in the making. We also have another triple bottom if we take account of April, May and July candles. The USD/CAD almost retraced all the way to the lows and is fighting against a fairly strong resistance level in the 0.9910/30 area and parity which, if broken, will be leading us towards the next level at around 1.0240/50 (roughly a 23.6% Fibonacci retracement on the last swing low) and further up on a longer term approach. The SMA200 (not shown) is presently at the level of March 2009 highs (1.2980/1.3000). The 38.2% correction area (1.0800/1.0900) is a strong resistance zone, just above the SMA34 and upper Bollinger band, where we might find some struggle before any further upside over the next year 2012.

The Loonie retraced down to the confluence of the weekly SMA34 and middle line of the Bollinger bands, near the 50% correction, from where it was rejected and closed last week above the 38.2% level. I would expect a continuation in extension from the previous swing high, a test and break of parity (August highs) and impulse towards the weekly SMA100 level (near the 127% extension) as first target, and secondly to the 138.2% at 1.0248, which also coincides with the monthly analysis as probable target in a medium term view.

On the Daily charts, the price closed on Friday exactly at the middle line of the bands, well above the crossing of SMA34 over the SMA100 and also above the SMA200. Projection in extension of the previous flag pole gives us 1.0238/40 as the 138.2%, also in tune with the monthly targeted range.

AUD/USD

The Aussie closed August candle still inside the steep rising wedge, however the deep spike and low price made earlier in the month marks the lower line of the previous ascending channel, which could be revisited again should the fundamentals trigger some more risk aversion in the markets. Also, it has since broken again the lower trend line and has been showing a slow but continuous descent afterwards. If this is the case, I don’t think however the price would go much further than the lows, as July 2008 highs coincides with the middle line of the Bollinger bands; we could maybe get down to the 50% correction at around 0.9700/0.9680 but unless the rates are heavily cut this pair is still very interesting for the carry and should soon regain its bullish temperament, after maybe some consolidation below parity.

We are expecting the RBA rates in less than 24 hours and though there seems to be some nervous anticipation (strong fall at the market opening yesterday afternoon), the prices haven’t moved much over last week. It would seem to me that the price is being contained at about mid-way either from parity and last lows, or from July all-time highs, depending on the rate statement and outcome. I would proceed with much caution and wait for tonight news to be able to gauge the scope of the move with more accuracy. Bearish moves are fast and furious on this pair and negative swaps help a lot when it comes to profit taking on short positions.

Price ended last week at the 61.8% Fibonacci retracement level on the last swing low, and I would expect it to stall between 1.0600 and 1.0500 (maybe even 1.0400) prior to the rate statement. On the Daily charts I would vouch for a 38.2% correction to around 1.0450 as first target, and 1.0350 as second target (50% retracement and SMA200). Let’s be very wary of any surprises.

XAU/USD (GOLD)

Gold has exploded off the grid and its well on its way to next psychological number 2000.00. I would expect a break of the previous highs and continuation to the upside before any significant correction.

Gold keeps on the rise and will probably try to reach 2000.00 over the next two weeks. However, I would expect some resistance and rejection at the 138.2% daily extension level (1995.00) and a similar behaviour as it exhibited when the price was expected to reach 1500.00 in the past. If the recent highs are effectively broken, be prepared for a relatively long consolidation range between 1920.00 and 1990.00/95.00.