Loonie ... the infamous USD/CAD
- Thread starter usdoutlaw
- Start date
Re Dodge: In the Globe a few days ago, can't remember exactly when. All I can find on the web is two speeches on May 1 and May 4 in which he defends floating exchange rates, says the BoC has no intention of intervening to push the loonie down, repeats what everyone knows - that CAD is a commodity-driven currency - and says that inflation is under control and he has no intention of raising rates.
As to $30 billion for Alcan: (a) a lot of it will be paid for by a stock swap; (b) it trades on NYSE as well as TSE, so a lot of it will be bought with USD; (c) if it was a well-planned move, they have been loading up on cheap loonies, or at least hedging, for months now. Meaning that it's already priced in. That's if it happens at all: at USD80 a share it may not be so attractive any more.
I leave technical traders with the following gem, posted on Google Financial on Feb 19 when Alcan was trading at USD55 (CAD64):
bearish technical signal for Alcan - it's way to high. Get out soon
and take the immense profits that are priced in at the moment. It's going back down to [CAD]57 by May - sell in may and go away yearly downturn for all markets.
Besides, there is no confirmed rumors - just plain old rumours about Alcoa's takeover possibility. Nothing for Alcan. No upward movement left - it's crossed the resistance level and will drop down to the 60 - 61 level before feb end (dividend distribution's gonna help the downturn) and then it'll back down to 57 within march / april.
As to $30 billion for Alcan: (a) a lot of it will be paid for by a stock swap; (b) it trades on NYSE as well as TSE, so a lot of it will be bought with USD; (c) if it was a well-planned move, they have been loading up on cheap loonies, or at least hedging, for months now. Meaning that it's already priced in. That's if it happens at all: at USD80 a share it may not be so attractive any more.
I leave technical traders with the following gem, posted on Google Financial on Feb 19 when Alcan was trading at USD55 (CAD64):
bearish technical signal for Alcan - it's way to high. Get out soon
and take the immense profits that are priced in at the moment. It's going back down to [CAD]57 by May - sell in may and go away yearly downturn for all markets.
Besides, there is no confirmed rumors - just plain old rumours about Alcoa's takeover possibility. Nothing for Alcan. No upward movement left - it's crossed the resistance level and will drop down to the 60 - 61 level before feb end (dividend distribution's gonna help the downturn) and then it'll back down to 57 within march / april.
For those of you who love magic lines on a chart, I offer the example of USDCHF, which did its big meltdown in Oct-Dec - from 2780 to 1923, about the same as USDCAD's recent performance. By Jan 28 it had recoverd to F5 (2590). F5 for USDCAD is 1652.
People were talking about parity a year ago, too. I on the other hand predicted in May that it would get to 1300 or 1400 "soon" (it got there in July), 1500 by the end of October (OK, I was 6 weeks out on that one) and 1700 by the end of the year (it hit it on Jan 4).
80% of the US-Canada trade deficit is in oil, lumber and metals, and most of that is oil. Last May, if you recall, oil was at $75-78, the US housing slowdown was just starting to affect Canadian lumber, and gold was over $700. It's only base metals that have kept going up. The total US trade deficit with Canada was running at $6.7 bln/mth a year ago, down to $5.8 bln this year. Last month I have for US crude oil imports is Feb: 252 mln bbl 2/07 vs 291 mln in 2/06. In fact this year's Feb figure was the lowest since 2003. In dollar terms, down from $15.6 bln to $12.8 bln. Ordinarily you might say this is the economic slowdown at work, and the Fed might cut rates. But the OK fire has cut demand for crude further, while pushing up gas-at-the-pump and thus literally fueling inflation, so a rate cut is unlikely. Now who thinks oil is going up, and why? Unless the clown in Iran comes up with some more guerilla theatre and the oil bulls go crazy for 2 weeks again. I'm 60, and I can't remember a time when there wasn't "unrest in the Middle East": people take this crap far too seriously. $61 and heading down; the loonie trails spot oil by 2-3 weeks.
People were talking about parity a year ago, too. I on the other hand predicted in May that it would get to 1300 or 1400 "soon" (it got there in July), 1500 by the end of October (OK, I was 6 weeks out on that one) and 1700 by the end of the year (it hit it on Jan 4).
80% of the US-Canada trade deficit is in oil, lumber and metals, and most of that is oil. Last May, if you recall, oil was at $75-78, the US housing slowdown was just starting to affect Canadian lumber, and gold was over $700. It's only base metals that have kept going up. The total US trade deficit with Canada was running at $6.7 bln/mth a year ago, down to $5.8 bln this year. Last month I have for US crude oil imports is Feb: 252 mln bbl 2/07 vs 291 mln in 2/06. In fact this year's Feb figure was the lowest since 2003. In dollar terms, down from $15.6 bln to $12.8 bln. Ordinarily you might say this is the economic slowdown at work, and the Fed might cut rates. But the OK fire has cut demand for crude further, while pushing up gas-at-the-pump and thus literally fueling inflation, so a rate cut is unlikely. Now who thinks oil is going up, and why? Unless the clown in Iran comes up with some more guerilla theatre and the oil bulls go crazy for 2 weeks again. I'm 60, and I can't remember a time when there wasn't "unrest in the Middle East": people take this crap far too seriously. $61 and heading down; the loonie trails spot oil by 2-3 weeks.
Oh yeah, he's fine with the rate. So's the Fed. So what's changed since February? There's a 1% difference, which should create a small carry trade ... rates staying where they are should favour the USD ... inflation is higher in the States, so there's more of a chance of a rate hike there; alternatively, they might let a recession take care of inflation, and a recession is good for USDCAD - it means the US imports less and the trade balance improves. USDCAD reached its all-time high in Jan 2002, just coming off the last recession. On the other hand, currencies that are driven by a lust for US equities, like EUR and GBP, should go up against USD in a recession. USDJPY is too weird to call. The pundits are calling for it to drop to 109ish, but the carry trade keeps pushing it up, so you have a holding pattern between 115 and 125. What would a recession do to it? Dunno.
ok gents ...
looks like we have a heated discussion about economic conditions in the US and Canada and relative conditions, etc etc
I agree with paulson, the USDCAD spot does trail the oil future. However, consider this, will any trader currently care what oil is doing right now when it is most certain that oil consumption will jump in the upcoming summer months?
Great, Dodge says commodity prices and commodity market pressures are driving up the value of the Canadian dollar, and great, there is no lagging indications of inflation, but what happens when demand for commodities and commodity prices make a dramatic move toward the heavens (again summer months). Will Dodge change his tune?
I am believe speculators are suggesting that with this dramatic down trend (with no significant profit taking relief rally) a Canadian rate hike ihas a high probability.
In anycase, I am not comfortable with a continued long term short because I lowered my stops last night to 1030 when usdcad spot price was in the single digits and looked like it was going to break.
A measely 50 pip trade for a 3 day hold ... that does not make me confident in a continued short.
I might try a short term long play if usdcad drops to low 20s high teens
but no dramatic expectations before the Fed rate tomorrow
looks like we have a heated discussion about economic conditions in the US and Canada and relative conditions, etc etc
I agree with paulson, the USDCAD spot does trail the oil future. However, consider this, will any trader currently care what oil is doing right now when it is most certain that oil consumption will jump in the upcoming summer months?
Great, Dodge says commodity prices and commodity market pressures are driving up the value of the Canadian dollar, and great, there is no lagging indications of inflation, but what happens when demand for commodities and commodity prices make a dramatic move toward the heavens (again summer months). Will Dodge change his tune?
I am believe speculators are suggesting that with this dramatic down trend (with no significant profit taking relief rally) a Canadian rate hike ihas a high probability.
In anycase, I am not comfortable with a continued long term short because I lowered my stops last night to 1030 when usdcad spot price was in the single digits and looked like it was going to break.
A measely 50 pip trade for a 3 day hold ... that does not make me confident in a continued short.
I might try a short term long play if usdcad drops to low 20s high teens
but no dramatic expectations before the Fed rate tomorrow
I am neutral re fed rate because I manage my positions so I have a 0 balance in my USD account. If the loonie drops, EUR and GBP will zoom. (I'm also short CHF - not sure about that - and JPY.) However, the fed will do nothing. They can't cut rates because of inflation, they can't raise them because it would terminally screw the housing market. Also Bernanke is a laissez-faire kind of guy.
Oil prices nowadays are 10% demand and 90% speculation. On fundamentals, they should have been going up at around 10% a year max. Inflation-adjusted, oil is the highest it's been since the OPEC crisis in the 70s, and there ain't no OPEC crisis, and there won't be. The OPEC ministers can sabre-rattle about cutting production to hold prices up, but fact is they can't. If they cut production, they get higher prices but pump less oil, so what good does it do them? The profit goes to the non-OPEC countries, which get the high prices and can also sell all they want. It's what made OPEC fall apart back then.
Fact is, $60-$70-$80 oil is a bubble, which like all bubbles will burst. Summer shmummer. The US economy is heading towards recession, crude inventories are piling up because of the shortage of refinery capacity, the speculators will start taking
their profits while they still can, and the whole thing will unwind.
Resources are this year's dotcom.
On fundamentals, oil should be trading at $30-$40, and come a recession it is likely to undershoot that. At that point we might see USDCAD zoom to $1.20, $1.30, who knows.
When it looks like the recession is bottoming out - my guess is they'll engineer it so that they have a good strong recovery going in time for the 2008 elections - there's this little lumber stock I want to buy. It was at $26 this time last year, can be had now for $6 and may fall more. Figure I'll buy it after their 2007 annual report comes out - it's bound to be terrible.
Oil prices nowadays are 10% demand and 90% speculation. On fundamentals, they should have been going up at around 10% a year max. Inflation-adjusted, oil is the highest it's been since the OPEC crisis in the 70s, and there ain't no OPEC crisis, and there won't be. The OPEC ministers can sabre-rattle about cutting production to hold prices up, but fact is they can't. If they cut production, they get higher prices but pump less oil, so what good does it do them? The profit goes to the non-OPEC countries, which get the high prices and can also sell all they want. It's what made OPEC fall apart back then.
Fact is, $60-$70-$80 oil is a bubble, which like all bubbles will burst. Summer shmummer. The US economy is heading towards recession, crude inventories are piling up because of the shortage of refinery capacity, the speculators will start taking
their profits while they still can, and the whole thing will unwind.
Resources are this year's dotcom.
On fundamentals, oil should be trading at $30-$40, and come a recession it is likely to undershoot that. At that point we might see USDCAD zoom to $1.20, $1.30, who knows.
When it looks like the recession is bottoming out - my guess is they'll engineer it so that they have a good strong recovery going in time for the 2008 elections - there's this little lumber stock I want to buy. It was at $26 this time last year, can be had now for $6 and may fall more. Figure I'll buy it after their 2007 annual report comes out - it's bound to be terrible.
From www.census.gov, for Jan-Feb 2007: Imports of
Total energy-related petroleum products $39 bln
of which Crude oil $29.5 bln of which $5.3 bln from Canada.
Natural gas imports from Canada are running at around
10 billion cu.ft. (Bcf) per day, i.e. around 590 Bcf for Jan-Feb.,
at a price of around $8 per 1000 cu ft makes $4.7 bln for Jan-
Feb.
So the $ ratio between crude oil and natural gas is 53/47, and
the contribution of refined oil (gasoline, kerosene, diesel)
is minor.
Prices and volumes of both oil and gas imports are both down from last year. Refined products of course are sharply up.
On the other hand, 86% of US natural gas imports come from Canada, so maybe that's where paradox got his impression.
My zero-dollar long-loonie portfolio is up 9% since I last made a deposit/withdrawal on April 11, which is a slight disappointment since it made 31% in March. Of course it hasn't been a good month to be long on the loonie, and EUR, GBP, CHF and JPY have also all been going mostly the wrong way for me, so I'm expecting much better by the end of the month. (Actually, I tell a slight fib. I was out of the loonie for most of the month, waiting for it to finish tanking. Once it was only 70-80 pips above the 30-year low, I loaded up. So far, so good.)
Total energy-related petroleum products $39 bln
of which Crude oil $29.5 bln of which $5.3 bln from Canada.
Natural gas imports from Canada are running at around
10 billion cu.ft. (Bcf) per day, i.e. around 590 Bcf for Jan-Feb.,
at a price of around $8 per 1000 cu ft makes $4.7 bln for Jan-
Feb.
So the $ ratio between crude oil and natural gas is 53/47, and
the contribution of refined oil (gasoline, kerosene, diesel)
is minor.
Prices and volumes of both oil and gas imports are both down from last year. Refined products of course are sharply up.
On the other hand, 86% of US natural gas imports come from Canada, so maybe that's where paradox got his impression.
My zero-dollar long-loonie portfolio is up 9% since I last made a deposit/withdrawal on April 11, which is a slight disappointment since it made 31% in March. Of course it hasn't been a good month to be long on the loonie, and EUR, GBP, CHF and JPY have also all been going mostly the wrong way for me, so I'm expecting much better by the end of the month. (Actually, I tell a slight fib. I was out of the loonie for most of the month, waiting for it to finish tanking. Once it was only 70-80 pips above the 30-year low, I loaded up. So far, so good.)
sorry guys I have been MIA
But I also have been waiting for the friday canadian employment numbers to compare against US PPI numbers today (friday)
Well anyway... I guess there is no momentum to the Canadian job growth (there was negative job growth). Even the smallest positive job growth would have been a sign of relative CAD growth, but negative JOBS!!! oh man what happened in Canada ... Did you guys run out of jobs that Canadians had to lose jobs? hehe
US numbers were ummm mixed. PPI core suggests no inflation, but there were stronger retail sales revisions. However what does that lead me to believe? US consumers will buy stuff at cheap prices ... and who wouldn't? Need to see CPI core data to confirm.
I think these numbers will not affect the current up trend in USDCAD ...
I am long from 1110 (bought on the pullback from the up swing before the present)
looking for targets in high 1200s in the next week
I might exit my longs at the end of the day and reposition monday
good luck and good trading
But I also have been waiting for the friday canadian employment numbers to compare against US PPI numbers today (friday)
Well anyway... I guess there is no momentum to the Canadian job growth (there was negative job growth). Even the smallest positive job growth would have been a sign of relative CAD growth, but negative JOBS!!! oh man what happened in Canada ... Did you guys run out of jobs that Canadians had to lose jobs? hehe
US numbers were ummm mixed. PPI core suggests no inflation, but there were stronger retail sales revisions. However what does that lead me to believe? US consumers will buy stuff at cheap prices ... and who wouldn't? Need to see CPI core data to confirm.
I think these numbers will not affect the current up trend in USDCAD ...
I am long from 1110 (bought on the pullback from the up swing before the present)
looking for targets in high 1200s in the next week
I might exit my longs at the end of the day and reposition monday
good luck and good trading