Yeah, well that's the trouble with dealing in exotics, innit? Low liquidity, high spreads, and who the hell knows anything about the Turkish economy, trade relations, etc.? Personally, I pay no attention to interest rates, except as forces that push the carry trade. I'm not in this to have a lump of cash sitting there earning 7% a year: I'd like to make 7% a month. E.g. I'm short both USDJPY and AUDJPY because it looks to me like the carry trade is getting, well, carried away with itself. The Economist calls JPY the world's most undervalued currency, and the pundits are calling for it to unwind itself down to 109 or so. Listen thou to the pundits, O acolyte, for their prophecies are self-fulfilling. Like unto the apple that falleth from the bough, what goeth up must come down: thus spake the Prophet Newton, a great man of gravity and Law. The USDJPY hath carried itself through Hubris unto 121.50 in February, and great was the fall thereof: in March it could be had for 115 and change. And when USDTRY unwindeth, as unwind it must, thou'll be stuck with it, 100-pip spread and all.
Loonie ... the infamous USD/CAD
- Thread starter usdoutlaw
- Start date
I guess we'll have to agree to disagree on the emotion and randomness.
As for USD/CAD, check this out...
http://www.reportonbusiness.com/servlet/story/RTGAM.20070515.wparity0515/BNStory/robNews/home
As for USD/CAD, check this out...
http://www.reportonbusiness.com/servlet/story/RTGAM.20070515.wparity0515/BNStory/robNews/home
Yeah, well.
(1) if "Weakness in the US dollar" and "M&A" activities are a factor, then why has the loonie gone up even more against
EUR and GBP than against USD? GBPCAD has plummetted by 1700 pips since Feb 1 and EURCAD has gone down 700 pips since mid-March.
(2) "Hawkish Bank of Canada"? They haven't touched rates in a year, and there's no reason for them to now.
(3) "Rising resource prices"? Resource prices, except for base metals, are well down over last year, oil from $78 to $62.
(4) M&A is old news. People have been buying big Canadian companies for the last 3-4 years, because of high resource prices and a low loonie. Lower resource prices and a higher loonie make it less attractive.
(5) What do Canadians do with the money they get out of selling their companies? Why, they invest it in equities, of course - often American equities. They might even try a bit of backatcha M&A like the Magna-Chrysler attempt. A high loonie plus a booming NYSE/NASDAQ plus a 1% interest rate differential makes US equities and bonds awfully attractive for Canadian investors.
This story is typical of the financial press in general. If these guys knew what they were talking about, they'd be getting rich, not working in a newsroom for $40k a year.
Hey, the guy left one cliche unturned: there's nothing in it about "unrest in the Middle East". The guy's incompetent if he couldn't figure out how to work that in - fire him.
Of course the bloggers are even bigger idiots. The War in Iraq for example: it consumes 0.4% of the US GDP and has been a constant since 2003. Clearly a major factor in the plunge over the last 2 months, then. For some reason, it was pushing USD upwards for the 6 months before that: do the hacks and bloggers have any explanation for that?
(1) if "Weakness in the US dollar" and "M&A" activities are a factor, then why has the loonie gone up even more against
EUR and GBP than against USD? GBPCAD has plummetted by 1700 pips since Feb 1 and EURCAD has gone down 700 pips since mid-March.
(2) "Hawkish Bank of Canada"? They haven't touched rates in a year, and there's no reason for them to now.
(3) "Rising resource prices"? Resource prices, except for base metals, are well down over last year, oil from $78 to $62.
(4) M&A is old news. People have been buying big Canadian companies for the last 3-4 years, because of high resource prices and a low loonie. Lower resource prices and a higher loonie make it less attractive.
(5) What do Canadians do with the money they get out of selling their companies? Why, they invest it in equities, of course - often American equities. They might even try a bit of backatcha M&A like the Magna-Chrysler attempt. A high loonie plus a booming NYSE/NASDAQ plus a 1% interest rate differential makes US equities and bonds awfully attractive for Canadian investors.
This story is typical of the financial press in general. If these guys knew what they were talking about, they'd be getting rich, not working in a newsroom for $40k a year.
Hey, the guy left one cliche unturned: there's nothing in it about "unrest in the Middle East". The guy's incompetent if he couldn't figure out how to work that in - fire him.
Of course the bloggers are even bigger idiots. The War in Iraq for example: it consumes 0.4% of the US GDP and has been a constant since 2003. Clearly a major factor in the plunge over the last 2 months, then. For some reason, it was pushing USD upwards for the 6 months before that: do the hacks and bloggers have any explanation for that?
Rational thinking is often wrong. Miss one fact, leave one variable out of the equation, get one proposition of the syllogism wrong, and the results become "irrational". When we say that the market behaves "irrationally" what we really means is that it is responding to forces that we didn't take into account in our calculations. It would be like saying that a balloon is acting "irrationally" when it goes up, not down, because we weren't aware it was full of hot air (like many hacks in the financial press).
Our rational calculations can include an assessment of "irrational" or "emotional" things, like the "index of consumer sentiment". Sentiment is irrational; nevertheless it can be quantified and its results rationally estimated. And the rational estimate could turn out to be wrong, for any number of reasons.
By the way, when we talk about the "herd" of investors, do you realize that we are talking about ourselves? We are the herd. If you want to know what the herd is thinking, read this forum, the various blogs, etc. You will find that each individual member of the herd believes that s/he is perfectly rational, intelligent and wise, and it is all the others who behave stupidly. What it means is this: the sum of millions of rational decisions, all pulling in different directions, has a net outcome that is hard to predict, i.e. "irrational". But it's no more "irrational" than an earthquake, which we also can't predict, even though we fully understand the physical forces involved.
Our rational calculations can include an assessment of "irrational" or "emotional" things, like the "index of consumer sentiment". Sentiment is irrational; nevertheless it can be quantified and its results rationally estimated. And the rational estimate could turn out to be wrong, for any number of reasons.
By the way, when we talk about the "herd" of investors, do you realize that we are talking about ourselves? We are the herd. If you want to know what the herd is thinking, read this forum, the various blogs, etc. You will find that each individual member of the herd believes that s/he is perfectly rational, intelligent and wise, and it is all the others who behave stupidly. What it means is this: the sum of millions of rational decisions, all pulling in different directions, has a net outcome that is hard to predict, i.e. "irrational". But it's no more "irrational" than an earthquake, which we also can't predict, even though we fully understand the physical forces involved.
So an earthquake is now an emotional response of the world?
Please. Emotion breeds illogical behavior. Illogical (or irrational) behavior is impossible to predict. An earthquake can be predicted. We just can't predict it accurately because we do not possess the technology at this point. Some day we will.
But predicting when my 2 year old daughter decides to throw her meatballs and spaghetti at me during dinner is never going to get any easier because it is based on an emotional response/desire: Daddy with pasta on him.
Please. Emotion breeds illogical behavior. Illogical (or irrational) behavior is impossible to predict. An earthquake can be predicted. We just can't predict it accurately because we do not possess the technology at this point. Some day we will.
But predicting when my 2 year old daughter decides to throw her meatballs and spaghetti at me during dinner is never going to get any easier because it is based on an emotional response/desire: Daddy with pasta on him.
Ya blagodariu Vas, Ivanovich, you will never be a successful trader if you can't follow a logical argument. My point was not that earthquakes are "emotional", but that you can get unpredictable (i.e. apparently irrational) behaviour out of completely deterministic (i.e. totally rational) systems. It's also called chaos theory or complexity theory or computability theory or the "butterfly effect".
Each of us, as a trader, tries to analyse the market rationally and make rational trades. But there are millions of us, each of us has our own theories, and what actually happens is the sum of all those theories, which is unknowable. I think - for rational reasons - that USDCAD is way underpriced and will be back to 1300 or more pretty soon. Other people have their own rational theories, which predict parity by the end of the year. Who's right? Who knows.
Fortunately for our sanity, the behaviour of currencies is not entirely at the mercy of speculators. Unlike stocks, which no-one buys for any reason except to make money, money itself is actually useful stuff, which people need from time to time. You land at the airport at Dubai and you have to turn your loonies into Dubai whatsits, you know you're going to get ripped off, but what choice do you have? Similarly, you're doing business in Canada, and you have a nice lump of loonies that you'd like to hang on to because the loonie is going up and up, but you can't, because you have payrolls to meet etc. You may have American suppliers or subcontractors who want to be paid in USD, and you have to convert your loonies, no matter how disastrous the rate.
Anyway, all the pundits (I mean the serious ones, like the Bank of Canada, not some hack writing in the Mope and Wail) agree that CAD is a resource-driven currency. I have my own model, which correlates 93% with historical behaviour. As a rough indicator, spot oil prices will do: not only is oil our single biggest export item, but what the specs do to oil prices, they tend do to other resources as well. Oil is down to $61-$62, whereas during the big slide it was going from $51 to $66. It is still (a) way lower than it was the last time the loonie was over 90 cents, and (b) way higher than it was when the resource boom started, around 2002. Back then, it was going for $20-30, and even if the fundamentals drive it up at 10% a year, it should still only be around $40, not in the 60s. So the indications are that $60-70 oil was a speculative fad, a bubble which is now bursting as all bubbles do, especially as the US economy slows down. A slower US economy means a lower trade deficit means less demand for the loonie means USD is going up. Remember that during the 2000-2001 recession, USDCAD went over $1.60.
The "parity" bunch I think are just drawing trend lines on their charts and figuring that down, down, down in the past means down, down, down in the future too. Then they find rationalizations for their superstitious beliefs. They seem to be dominating the market right now. But realities will eventually catch up with them.
That's my entirely rational theory, anyway. Like any theory (except evolution) it has a good chance of being wrong. But I've yet to hear another that makes sense to me. Assuming that the market behaves like your 2-year-old is no way to make money.
BTW, despite the fact that everything has gone wrong for me this month, I'm at this point only $300 down. Given average luck, by the end of the month I'll be RICH! RICH! Well, semi-solvent, anyway.
Each of us, as a trader, tries to analyse the market rationally and make rational trades. But there are millions of us, each of us has our own theories, and what actually happens is the sum of all those theories, which is unknowable. I think - for rational reasons - that USDCAD is way underpriced and will be back to 1300 or more pretty soon. Other people have their own rational theories, which predict parity by the end of the year. Who's right? Who knows.
Fortunately for our sanity, the behaviour of currencies is not entirely at the mercy of speculators. Unlike stocks, which no-one buys for any reason except to make money, money itself is actually useful stuff, which people need from time to time. You land at the airport at Dubai and you have to turn your loonies into Dubai whatsits, you know you're going to get ripped off, but what choice do you have? Similarly, you're doing business in Canada, and you have a nice lump of loonies that you'd like to hang on to because the loonie is going up and up, but you can't, because you have payrolls to meet etc. You may have American suppliers or subcontractors who want to be paid in USD, and you have to convert your loonies, no matter how disastrous the rate.
Anyway, all the pundits (I mean the serious ones, like the Bank of Canada, not some hack writing in the Mope and Wail) agree that CAD is a resource-driven currency. I have my own model, which correlates 93% with historical behaviour. As a rough indicator, spot oil prices will do: not only is oil our single biggest export item, but what the specs do to oil prices, they tend do to other resources as well. Oil is down to $61-$62, whereas during the big slide it was going from $51 to $66. It is still (a) way lower than it was the last time the loonie was over 90 cents, and (b) way higher than it was when the resource boom started, around 2002. Back then, it was going for $20-30, and even if the fundamentals drive it up at 10% a year, it should still only be around $40, not in the 60s. So the indications are that $60-70 oil was a speculative fad, a bubble which is now bursting as all bubbles do, especially as the US economy slows down. A slower US economy means a lower trade deficit means less demand for the loonie means USD is going up. Remember that during the 2000-2001 recession, USDCAD went over $1.60.
The "parity" bunch I think are just drawing trend lines on their charts and figuring that down, down, down in the past means down, down, down in the future too. Then they find rationalizations for their superstitious beliefs. They seem to be dominating the market right now. But realities will eventually catch up with them.
That's my entirely rational theory, anyway. Like any theory (except evolution) it has a good chance of being wrong. But I've yet to hear another that makes sense to me. Assuming that the market behaves like your 2-year-old is no way to make money.
BTW, despite the fact that everything has gone wrong for me this month, I'm at this point only $300 down. Given average luck, by the end of the month I'll be RICH! RICH! Well, semi-solvent, anyway.
well well what is going on?
mudslinging is terrible ... trading ideas with reasons backing them is better
spaghetti and meatballs is not going to help the usdcad
anyway ... I went bottom fishing because I am taking a contrarian view ... my first attempt was a buy @ 0985 which ended up as a stopout
then I bought @ 0970 which is looking better now ... I hope that the last rally to the 20 EMA on the daily was not the relief rally I was hoping for
It seems momentum is taking over, and channels dictate momentum so i will go with the daily channel but I am hoping for a rally toward the top of the channel heh
lets see how this long pans out until the Canadian CPI numbers
good luck good trading
mudslinging is terrible ... trading ideas with reasons backing them is better
spaghetti and meatballs is not going to help the usdcad
anyway ... I went bottom fishing because I am taking a contrarian view ... my first attempt was a buy @ 0985 which ended up as a stopout
then I bought @ 0970 which is looking better now ... I hope that the last rally to the 20 EMA on the daily was not the relief rally I was hoping for
It seems momentum is taking over, and channels dictate momentum so i will go with the daily channel but I am hoping for a rally toward the top of the channel heh
lets see how this long pans out until the Canadian CPI numbers
good luck good trading
No one is mudslinging. Moy tovarisch and I are just discussing irrational vs. rational behavior in how it relates to the market, specifically CAD. Try to think a bit deeper. No one is angry.
I added to my position at 1.0988 yesterday. I am conifdent the next big move is up, but it may take a while. This pair requires enormous patience, which is something I've said for years (see my previous USD/CAD thread on here).
I added to my position at 1.0988 yesterday. I am conifdent the next big move is up, but it may take a while. This pair requires enormous patience, which is something I've said for years (see my previous USD/CAD thread on here).