The Forex Pattern Price Time Report - USD CAD - Evening Session

The USD CAD rallied as gold and crude oil sold off after Thursday’s spectacular gains.  These two commodities are key to the Canadian economy so a resumption of the down trend could lead to future weakness in the economy.  The USD CAD closed lower for the weak and confirmed the previous week’s reversal top.  This leaves open the possibility of another attempt to rally crude oil and gold next week.  Resistance is 1.0728.  A break through 1.0418 indicates weakness and sets ups a further decline to 1.0351.

News that a Korean Bank is “considering” an investment in Lehman Brothers helped rally the Dollar on Friday.  The strong up move erased about half of the Dollar’s loss against a few of the majors, except for the British Pound which made a new low for the year on Friday.
 
The move to buy Lehman Brothers and the rally in the Dollar clearly identified the main cause of the Dollar’s recent weakness.  Since July 15 the market seems to have absorbed the problems at Fannie Mae and Freddie Mac as a government bailout has been accepted as the final solution.  Traders, however, did not know how to handle the Lehman situation.  Since the Fed has already indicated that Lehman was not a Bear Stearns, and not a takeover candidate, the break in the Dollar this weak was an indication that the market was gearing up for the worst - a failure at Lehman.

The news regarding a possible buyout of Lehman gave the Dollar a little breathing room, but the failure to close all of the Forex markets lower for the week, left open the possibility of another sell-off next week.  The key to next week’s direction is to watch Lehman Brothers, not Fannie Mae or Freddie Mac. In other news, Bernanke hurt the Dollar’s rise a little when he stated that he expected slower inflation and a more stable currency.  This statement led trader’s to believe that the Fed was in no hurry to raise interest rates.

PATTERN

Main Trend:  Up  
Main Trend Top:  1.0728 (08-12-08)
Main Trend Bottom:  .9973 (07-15-08)

PRICE

1.0867        Main Trend Top (08-16-07)
1.0798        .618 Retracement
1.0728        Main Trend Top (08-12-08)
1.0610        .618 Retracement
1.0573        50% Retracement
1.0465        50% Retracement

1.0463           New York Close

1.0351        50% Retracement
1.0263        Gann Angle Up  
1.0261        .618 Retracement

TIME

Aug 21        90-Day Cycle