DRT's Currency Trades

USDCAD

The short term range on CAD is 1320 to 1110. WIth 1250 coming in as the midrange.

I see a good long entry at 1145/1155 on a move back down. Be cautious here and look to play a trade up to the midrange of 1250. Next target I have is 1.1303, but I would take profit or size out at 1250. Any move down below 1145 area and I would get out fairly quickly.

So our theme is that we are heading up from the bottom of the range to test the 1250 midrange. We will watch closely here to see if we test the top of the range at 1320. A break above here is very bullish. We will get out of this mode on a break below 1110 as that is bearish.

Sobriety check points are set up for this pair at many levels.

DRT

Mo_CAD.PNG
 
Currency Strategists: Citigroup Says Exit Canadian Dollar Bet

By Haris Anwar

Oct. 2 (Bloomberg) -- Citigroup Inc. advised exiting a bet that the Canadian dollar would gain against its U.S. counterpart, saying the currency is ``overvalued'' given speculation the Bank of Canada will cut interest rates.

The currency lost 1.3 percent last month as the Bank of Canada kept its benchmark interest rate at 4.25 percent in September, after seven straight increases from September 2005 through May.

``The main reason for this shift is that we probably have seen a peak for the Bank of Canada rate tightening for this cycle,'' Steve Saywell, chief currency strategist at Citigroup Inc. said in London, in an interview on Sept. 29. ``It's prudent to take profit,'' on the Canadian dollar position, he said.

The currency ended September at 89.47 U.S. cents. One U.S. dollar buys C$1.1180. The Canadian dollar reached 91.44 U.S. cents on May 31, or C$1.0932, the strongest since January, 1978. Canada's dollar has risen 3.9 percent this year, bolstered by gains in commodity prices.

New York-based Citigroup initially recommended putting on the bet in mid-August and said it generated a 0.6 percent return.

The currency ``now appears overvalued relative to expected short-term rate differentials,'' Citigroup said in a report on Sept. 28. ``Markets now price a greater chance of an easing from the Bank of Canada than a hike.''

M&A Story

Canada's December bankers' acceptances futures yielded 4.245 percent on Sept. 29, compared with 4.38 percent on Aug. 16. The March contract yielded 4.14 percent.

Bankers' acceptances futures settle at a three-month lending rate that has averaged 16 basis points, or 0.16 percentage point, above the central bank's rate target since Bloomberg started tracking the difference in 1992.

``We're still quite bullish on the Canadian dollar going forward,'' said Saywell. ``The mergers and acquisitions story will continue to provide support to the currency.''

He predicts the currency will appreciate to C$1.08 in the next three months and then to C$1.06 in 12 months, which would be the strongest since July 1977.

The value of mergers and acquisitions transactions involving Canadian companies more than doubled to a record in the second quarter, led by mining, Toronto-based investment bank Crosbie & Co. said in August.

The Canadian currency also fell last month amid speculation a slowing world economy will reduce demand for the nation's commodities.

Canada's exports of products such as copper and crude oil helped push the currency to annual gains the past four years.

The Reuters/Jefferies CRB commodities index touched a 14- month low in September.
 
I will try to get the USDJPY thoughts posted later in the session.

Right now I see a better long entry down near the 117.33 area. If we break to the top now, next stop is 118.84 and 119.10 area.
 
We are nearing a possible buy area.


Quote from downrivertrader:

USDCAD

The short term range on CAD is 1320 to 1110. WIth 1250 coming in as the midrange.

I see a good long entry at 1145/1155 on a move back down. Be cautious here and look to play a trade up to the midrange of 1250. Next target I have is 1.1303, but I would take profit or size out at 1250. Any move down below 1145 area and I would get out fairly quickly.

So our theme is that we are heading up from the bottom of the range to test the 1250 midrange. We will watch closely here to see if we test the top of the range at 1320. A break above here is very bullish. We will get out of this mode on a break below 1110 as that is bearish.

Sobriety check points are set up for this pair at many levels.

DRT

Mo_CAD.PNG
More...
 
I can kind of feel the hum in the EUR traders around the world. Here we are at the first day of the last quarter of the year. The EUR is supposed to go to at least 130. Many of the big boys still heavily long, those that weren't sure are jumping back on board. Hedgies busily making calculations. Time to get the numbers right so we look good at year end.

A little rumored bad ISM number causes everyone to jump on early today. I don't think the data was that bad overall.

Ironically, we have the EUR testing our mid-range that could lead to a directional break out. Are they correct? They may fuel enough emotion to run us up to the 2830 range to find out. One thing is for sure, if they are incorrect, I think there will be some speculative panic exodus in the market in the days ahead.

Let's watch to see how the 2720 midrange plays out.

Take care.

DRT
 
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