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Loonie ... the infamous USD/CAD
- Thread starter usdoutlaw
- Start date
US recession = reduced demand for commodities = fall in commodity prides and reduced commodity imports =
improved trade balance with Canada = fewer USD coming
in. Supply and demand.
improved trade balance with Canada = fewer USD coming
in. Supply and demand.
Quote from gspaulsson:
US recession = reduced demand for commodities = fall in commodity prides and reduced commodity imports =
improved trade balance with Canada = fewer USD coming
in. Supply and demand.
But what happens when China starts buying resources from Canada when the US stops? The Chinese will see cheap resources in Canada due to less demand from US. Thus indirectly making the CAD more valuable than the USD.
Is this a possibility?
Sure, we'll start pumping oil to China through the Calgary-Beijing pipeline.
The Chinese get their oil from Russia. Anyway, if US demand drops off, so do world prices.
Also an American recession will cause the Chinese rate of growth to slow down as well.
Apparently the US is stockpiling LNG because low demand in Asia and Europe makes it cheap right now. That means they buy less from us through the pipeline. So the mid-term outlook for Canadian natural gas doesn't look strong, either.
Strong Canadian economic figures I suspect are caused by a revival of the manufacturing sector when the loonie dropped. The present high loonie will knock that on the head, and make M&A less attractive.
The weakness of USDCAD is not caused by weakness in USD, which is going gangbusters against all the other majors, but by strength in the loonie. So it was a mistake for me to hedge only against USD weakness - I should have been offsetting my large CAD debt by selling EURCAD and GBPCAD. Too late now, I suspect.
The Chinese get their oil from Russia. Anyway, if US demand drops off, so do world prices.
Also an American recession will cause the Chinese rate of growth to slow down as well.
Apparently the US is stockpiling LNG because low demand in Asia and Europe makes it cheap right now. That means they buy less from us through the pipeline. So the mid-term outlook for Canadian natural gas doesn't look strong, either.
Strong Canadian economic figures I suspect are caused by a revival of the manufacturing sector when the loonie dropped. The present high loonie will knock that on the head, and make M&A less attractive.
The weakness of USDCAD is not caused by weakness in USD, which is going gangbusters against all the other majors, but by strength in the loonie. So it was a mistake for me to hedge only against USD weakness - I should have been offsetting my large CAD debt by selling EURCAD and GBPCAD. Too late now, I suspect.
If you start with 1998-1999 as a baseline for oil prices and assume a natural growth rate of 17.68%, you track oil prices pretty closely through mid-2004. Iraq in March 2003 isn't even a blip on the chart, even when the wackos start blowing up pipelines. From mid-2004 until late 2006, oil is going up at more like 40% a year - unsustainable, a spec bubble. Maybe Katrina in 2005 had something to do with it, but oil prices started zooming a year before. It's "excess liquidity", going around from one market to another looking for something to do with itself and blowing up one bubble after another. Project the 17.68% line through to this year, and you get a range of $47-73. with a median of $60.60, which is roughly where we are. In other words, we're back to sanity, more or less. If there's a recession, oil is likely to undershoot that $47 price - hence $40 oil.
Actually, a 17.68% growth rate looks high to me. World GDP is growing at 5%, add 2-3% for inflation, another 5% say for diminishing marginal returns in production Subtract for diminishing energy density (advanced economies consume less energy per unit of GDP than emergin ones, so that demand for oil should increase more slowly than GDP as more and more countries cross the threshold and become "advanced" ... I don't know how to account for 17.68%, except it's what fits the curve, but I certainly can't account for 40%.
Actually, a 17.68% growth rate looks high to me. World GDP is growing at 5%, add 2-3% for inflation, another 5% say for diminishing marginal returns in production Subtract for diminishing energy density (advanced economies consume less energy per unit of GDP than emergin ones, so that demand for oil should increase more slowly than GDP as more and more countries cross the threshold and become "advanced" ... I don't know how to account for 17.68%, except it's what fits the curve, but I certainly can't account for 40%.
OK, Ivanovich, point taken. But oil sands oil is expensive, and as far as I know not connected by pipeline to any port. So it would cost a lot to ship anywhere. Given any drop in demand, it would be the first to go. There must be some threshold price below which Alberta oil ain't competitive.
Quote from gspaulsson:
The weakness of USDCAD is not caused by weakness in USD, which is going gangbusters against all the other majors, but by strength in the loonie. So it was a mistake for me to hedge only against USD weakness - I should have been offsetting my large CAD debt by selling EURCAD and GBPCAD. Too late now, I suspect. [/B]
So you agree that the Canadian currency is appreciating due to interest rate differentials? (which were my thoughts, but then you brought up some good commodity ideas)
You dont need a pipeline to transport oil ... just super tankers
plus China is probably going to step up its spending habits so I am not sure the US will be the only consumer nation out there =)
anyway ... I am not going to get into a crazy economic battle ... thats for greenspans to figure out
I just trade expectation
Ok well I have put on another trade in the USDCAD
Long USDCAD @ 0979 & 0988
(based on no breakdown ...yet, from charts it looks like it should have had the momentum to gow lower but didn't)
I am going to play the recent range and put limits in the 1050s
stops are at 0960.
good luck and good trading
I just trade expectation
Ok well I have put on another trade in the USDCAD
Long USDCAD @ 0979 & 0988
(based on no breakdown ...yet, from charts it looks like it should have had the momentum to gow lower but didn't)
I am going to play the recent range and put limits in the 1050s
stops are at 0960.
good luck and good trading