yeah, i missed the top too. Actually made quite a mess of the day - went short at 1152, regretted it when it started going up again and went long at 1155, shorted again at 1150 with a 9-pip trailing stop which got tripped at 1133, then went away to bash my head against the wall and remind myself I dont do that stuff any more. However my AUDUSD and USDJPY positions made a nice profit and EURUSD and GBPUSD are both climbing out of the pit. USDCHF seems to be climbing (it should - Swiss interest rates are almost as low as Japan's, don't understand why it's been tanking so long. The US can't buy that many cuckoo clocks, surely. But my current policy is to be long on USDCAD and short USD against everything else, so I'm rowing against the tide in USDCHF, setting limit sells at ridiculously high prices with modest targets. Needless to say, no action today.
AUDUSD is a different beast, partly driven by carry trade, and the Aussies don't sell oil to los Yanquis. Oil is not only the biggest single component of the US trade deficit with Canada, but roughly correlates with resource speculation in general.
The economics are simple: they buy our oil, they pay us in USD, if we think the USD is going up we put them in our USD accounts and hang tight, if we think it's headed down we dump them asap. However, companies doing business in Canada need to buy loonies to meet payrolls, pay suppliers, etc: they need their loonies when they need them, regardless of what the currency market is doing. Of course they can hedge with futures, but on the spot market you have a lot of necessity trading, which provides those of us who do it for fun and profit to - well, have fun and make a profit.
There is BTW a .93 correlation between the loonie and MMA spot oil. What counts is not the spot price but the pooled monthly price, which determines (has a major influence on?) how much USD the oil cos are swimming in. Spot prices by themselves dosn't have much influence, but as they pull the MMA up or down, they are good indicators of what this month's pooled price will end up being. Hence the lag.
Interest rates are a minor contributor to USDCAD. There has been exactly a 1 point gap between the two for a year now, and USDCAD has been all over the map. Now how the specs react to interest rates and rumours about interest rates is another story .... Remember the big swoon last July set off by the fact that the Fed DIDN'T RAISE RATES. Wow. Non-news, and it set off a massive chain reaction.
I play USDCAD because it's relatively simple and in the long run predictable, because the economic relationship between the US & Canada is fairly simple. On everything except resources, our trade is pretty even, and so are financial flows. The US goes into recession, so do we. They boom, we boom. Not exactly in synch, but more so than any other 2 major countries on earth. Even all the M&A talk is mainly just talk. When people buy our companies, what do we do with the money? We use it to buy their companies. Alcoa will end up owning Alcan, and Magna will end up owning GM.
A 1% interest rate differential isn't exciting: the carry trade players would rather get into NZDJPY, where the differential is 7%, or AUDJPY at I think 5.75%. Dont play AUDJPY myself, but I notice it broke 100 on Thursday. I use IB, and they don't offer NZDJPY, and if they did, the spread would be ferocious. 'Swhy I don't play crosses as a rule.
Everyone agrees the loonie is a resource-based currency, even the Bank of Canada, & The Economist called it a "petro-currency". So this is not just me theorizing.
BTW, when we bitch about the specs - that's us we're talking about.
