A day like Today was quite expected after the recent sharp declines in the stock markets around the globe. The danger in these kinds of days is that many traders and investors tend to believe that such risings mean that a new uptrend has begun. However, the truth is very far from that, and the only reason that the markets jumped so dramatically is that the short-positions holders had to cover their positions and caused a sharp short-squeeze. It does not mean that this momentum cannot continue, but the chances are against it.
Naturally, the strong momentum of the USD, which comes along with the hysteria in the stock markets, has also weakened and the currencies got a chance to correct.
There were large gaps against the USD in most of the major pairs, which were caused by those who took profits of what they gained during the recent session. Because of that, the pair fell almost 200 pips before it found the support at 1.03. In fact, this was an accurate retest to the break-up zone from just few weeks ago. Investors, who missed the original break-up, got the opportunity to enter the game, and those who were already in it, got the chance to enlarge their positions.
If the CAD continues rising and breaks under the support of 1.03, it might slide to the 200 SMA at 1.018. However, this looks like a possible reversal pattern and a break-up of 1.04 might take the USD up to 1.05-1.055.
Unlike other currencies, the Euro has not made a strong correction against the USD, though it looked like it was about to do so on the beginning of the day. As we estimated, 1.32 was a strong support and as long it stays above it, the EUR has better chances to gain points against the USD.
The pair EUR/CAD has been stamping since September, even though the recent daily candlesticks leaves no doubts about the current momentum. It has been moving between 1.41 and 1.38 and now the pair is touching the lower boundary. A successful break-down this time, might fall to 1.365 and even lower. However, if the current pattern remains, the pair might correct up again.