Loonie ... the infamous USD/CAD

I don't think it can be interest rate differentials: GBP is at 5.25%, same as USD, so the differential is in their favour against the loonie, whereas EUR is at 3.5, so we have the edge. Yet both are tanking against CAD. I think people who are interested in carry trade and only play the majors are all in USDJPY and AUDJPY, and rates otherwise don't make that much difference. Now AUD has a 1% edge over USD, yet USDJPY is zooming, but AUDUSD is stuck, so go figure.

Difference is USDCAD is around 60 pips above the 30-year support level, and I can't see a sensible reason for it. USD is strong elsewhere - has knocked GBP back from 2.01 to 1.97 and EUR from 1.36 to under 1.35. GBPCAD & EURCAD are both still well above their recent lows, so if you want to long CAD, that would be where to go. GBPCAD as I recall bottomed out at around 1.95 early 2006, is now at 2.17 - plenty of room to drop. EURCAD was around 3850 last June, now 1000 pips higher, so ditto. I have offset 1/2 my CAD exposure by shorting GBPCAD at 2.1712, have a sell in for EURCAD at 4860: we shall see.

What I can't figure out is USDCHF: CHF rate is is only 2%, there should be a huge carry trade, yet the pair has generally been sinking. The Swiss are also resource exporters, so I guess commodities trump interest rates. GBPCHF on the other hand remains strong, 1600 pips above its long-time average, and that must all be carry. I dunno. At this stage it all gets too complex for me.
 
outlaw, how you doing there?

I'm curious about something. When this rather severe down move started you kept saying you were going to wait for a relief rally before getting on board and going short. We had a relief rally last Friday and I was curious why you didn't want to go short that and instead are continuing to keep working longs?

This is not a criticism btw, I'm just trying to understand why your earlier plan has changed?

I'm sure you noticed that the CAD was the only one appreciating despite broad USD appreciation yesterday.

Best regards,
MK
 
Well, RBC is with me: they're predicting 1.21 "in response to easing energy and commodity prices, smaller M&A flows and ongoing negative interest rate spreads with the US"
 
It is interesting the divergence the past few days between USD/CAD and the USDX, especially with the rest of the majors 100-300 pips off their recent highs. Still doing some analysis, but close to a long position entry here.
 
Quote from MidKnight:

outlaw, how you doing there?

I'm curious about something. When this rather severe down move started you kept saying you were going to wait for a relief rally before getting on board and going short. We had a relief rally last Friday and I was curious why you didn't want to go short that and instead are continuing to keep working longs?
....

Best regards,
MK
More...

Well I was long that relief rally ... if you can call a 150 pip move a relief rally for a 900 pip drop. Basically I was hoping for 200 - 300 pip which would be a decent profit taking/relief rally after 900 pips.

So I thought we would snap back to mid to high 1200s. Thats where I had my short limits open.

Alas i can never have my way ... just like last night. I got stopped while I was sleeping. (that should be a movie ... hehe)

and thank goodness as I type this the CAD retail sales numbers are driving the USDCAD to new lows ... still looking for a god long ... this doesnt make sense like MR gspaulson says.

US economy after the recent US numbers is not doing so bad compared to the canadian.

Oil prices have dropped even though gasoline is still high ... curious.

blah blah blah
 
Quote from gspaulsson:

I don't think it can be interest rate differentials: GBP is at 5.25%, same as USD, so the differential is in their favour against the loonie, whereas EUR is at 3.5, so we have the edge. Yet both are tanking against CAD. I think people who are interested in carry trade and only play the majors are all in USDJPY and AUDJPY, and rates otherwise don't make that much difference. Now AUD has a 1% edge over USD, yet USDJPY is zooming, but AUDUSD is stuck, so go figure.

......complex for me.
More...

Oh come on ... pricing is all relative. Even though the US has higher rates than lets say EUROzone its all about potential. And I think everyone thinks the Eurozone is a safer bet interest rate wise, growth wise and inflation increase wise than the US. The days of college graduates making near $100K salaries is over. As for the UK economy ... thats just a weird phenomenon (probably due to the premium status of all things British)

For the US economy to become strong again there has to be a paradigm shift like some type of technological advantage ... maybe F-Cell technology?

But the USD should not be this low if you take all the metrics into account (even if we import more than we export) Look at the TICs data ... investors still love US investments.

I must remind you that these are just opinions ... :D
 
PLUS I heard rumors about drug dealers using EUROs instead of dollars as their currency for transactions.

This could be a sign that the EURO is the current preferred currency
 
Ok again I am going to go long USDCAD against the trend

USDCAD hit Daily Channel support ... well broke it a little by 2-6 pips but I am going to play the bounce

Opened USDCAD long @ 0921
looking to add after the selling pressure dies down.

I am looking for 50 - 80 pips

stops below the current lows of 0908 @ 0900.
 
It looks like the USDJPY carrion trade topped out at 121.38 and is now doing one of its patented plummets. We may see it back at 116 by the end of June. , so my short there should be paying off in a day or two. My hope is that the interest rate junkies will notice that AUDJPY is 100 pips off its high and will shift their interest there, at which point my position there will pay off, too. The decision to hedge my CAD deficit by shorting GBPCAD paid off very nicely: I made 100 pips on it overnight, enough to (almost) make up for the fact that all my other positions continue to go the wriong way. I am hanging on to EURUSD and GBPUSD, which are both near the bottom of their year-long trading channels. The pundits are still calling for EURUSD at anywhere from 1.36 to 1.40 and USDGBP at 1.98-2.02, with interest rate increases expected down the line, so I'm waiting for a rebound. In the meantime, USDCAD continues to astound: now it's below last year's low and in fact lower than it's been since 1978: I still can't see a justification for it, especially in the light of USD strength elsewhere. I think this morning's plunge was stop-hunting, and it will spend the day recovering as the jackals buy back in. At any rate, I don't plan to panic just yet.

This morning's Globe bears (pun intended) the news that BMO showed a $680 million loss on commodities trading, largely natural gas, following on Amaranth (we already knew that, but now it's official). So another warning sign for the commodities bulls.

I wrote yesterday that oil "should" be trading in the $47-73 range this year, if we project from the pre-hockey stick growth rate of 17.68%. But on second thought, even that growth rate must be inflated: nothing grows that fast in the long run, not even the Chinese economy. If oil prices keep going at that rate, we don't need to worry about global warming:
 
(sorry, hit enter prematurely) ...won't have to worry about global warming, because oil will hit $1000 in 2024 and even the most expensive alternative energy sources will look cheap. If the "high oil prices are here to stay" crowd are right and you apply the 40% growth rate of the last 3 years, we will get to $1000 by 2013.

Nah, I'm hanging onto my hat, going for $40 oil and USDCAD at 1.20 by year-end. End-of-month target remains at 1300.

Even loony bulls eventually realize that all good things come to an end.
 
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