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Tuesday, October 24, 2006

USD/CAD: Consolidating after Probe Through 200-Day Average

USD/CAD is in consolidation mode after triggering stops on the move through the 200-day moving average at 1.1305 this morning. The USD retains a firm bid across the board this morning with dealers pricing in the risk of a hawkish statement from the FOMC on Wednesday.

The economic calendars are light today with employment insurance claims from Canada expected at 12:30 (seen up 1.7%) and Richmond Fed at 14:00 GMT. M&A overhang and month-end repatriation by oil and gas producers may limit USD/CAD upside this morning.

CVRD extended its bid for Inco yet again, this time to November 3, while the Shell Canada deal is still in the works. 1.1290/00 is modest support on dips in USD/CAD near-term, while 1.1335 is resistance, the 61.8% retracement of the 1.1420/1.1205 drop. USD/CAD trades now at 1.1305.

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