Every week I analyse all of the top 10 major Currencies against each other and from this I prepare a pecking order.  After being stuck at 5 or 6 for a number of weeks, the Canadian Dollar has this week moved up strongly to reach number 2.  No prizes for guessing that the US Dollar is number 1, as it has been since the start of August.  The question is, can the Canadian Dollar trump the US Dollar soon, or is this as good as it gets for the Canadian Dollar and maybe it is becoming due for a correction? 

The USD/CAD chart certainly looks interesting at the moment.  The recent peak at 1.1099 was just shy of the 76.4% Fibonacci retracement of the 1.1277-1.0622 decline seen between March & July.  Furthermore, the speed of the latest reversal from 1.1099, slightly overshooting resistance-turned-support at 1.0936-42, potentially marks the start of a return towards the key 1.0815-17 support level, the May / August lows which mark the "shoulders" of a multi-month "head & shoulders" base (with July's sell-off to 1.0622 marking the "head"). 

However, in order for the USD to remain bullish over the medium-term against the CAD, the latest retreat will need to form a higher low above 1.0815-17 at a maximum of 1.0860-61, the April & August lows made immediately prior to 1.0815 & 1.0817.  Also in the USD's favour are the aligned & rising 22, 65 & 260 day (1, 3 & 12 month) moving averages.  Furthermore, for now the MACD indicator remains above the pivotal zero line indicating the trend is bullish at this time.

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On balance, the Canadian Dollar is not currently expected to trump the US Dollar in our rankings, but it is expected to remain one of the best performing Currencies around given it's bullish structure against the likes of the AUD, JPY, NZD & GBP.  However, given that it has recently enjoyed a significant appreciation, as a general rule we would prefer to be generally buying the CAD on weakness rather than at current levels or chasing it higher.