Loonie ... the infamous USD/CAD

I gave my theory, for what it was worth. Low loonie -> lots of M&A, manufacturing exorts go up, high dollar mitigates drop in resource prices, everybody's happy, everybody propers, the economic data look great. Result: everyone starts buying loonies. Result: loonie goes up, up, up, especially with resource prices seeming to be enjoying new life. Eventually we get to high loonie. High loonie -> reduction in M&A (in fact maybe reverese M&A), manufacturing exports drop, low dollar reduces the benefit of high resource prices, nobody's happy, the economy starts going into the crapper, the economy starts looking weak. Result: everyone starts selling loonies. Prediction: USDCAD will stay in free-fall as long as the Canadian economy looks good, especially if it kicks up inflation and Dodge raises rates to parity and/or the Fed drops rates to avoid a recession. Ie temporarily and for the next month or two the lonnie bulls rampage. After that, reality sets in and USDCAD stages a strong rally. Especially if oil drops and the US goes into recession.

Why does everyone have trouble believing in $40 oil? It was going for $28 in 2003 (during the war in Iraq, yet). Has the world changed that much since then? It may take a few years to inch down, but it did after OPEC in the 70s and it will again now.
 
Quote from gspaulsson:


Why does everyone have trouble believing in $40 oil? It was going for $28 in 2003 (during the war in Iraq, yet). Has the world changed that much since then?
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Yes - 2 reasons off the top of my head.

#1 - China has no reserves like the US does and is in the process of building a massive reserve system country-wide. The increased demand in the system from the likes of India, China, etc will only grow larger once China starts filling its reserves.

#2 - Recent reports suggesting that Ghawar in Saudi Arabia, which is by far the world's largest and most important oil field, has entered into a period of permanent decline.
 
Bulls can always cite one-sided evidence, but nothing in the real world grows sustainably at 40% a year. The demand for oil isn't increasing at that rate, the supply of oil isn't declining at that rate, and the rate at which we pump it has nothing to do with the size of reserves anyway - not until fields start drying up.

China isn't that big a player - I think they account for 10% of world oil consumption, India is less. The US is still way the biggest consumer, and if they go into recession, or people decide not to go driving this summer because of high gas prices, that would swamp anything the Chinese are doing. Petrochina also announced a major new find a couple of weeks ago.

The last 3 year have been a bubble, bigger than the OPEC bubble. That one popped, this one will too.
 
Yes, yes. China is growing like gangbusters. 10% a year is terrific, 11% is astounding. 40% (oil and other resources) is a bubble.

Rapid growth is also relatively easy when you start from a low base. When the Chinese economy matures, its growth rate will slow down to 2-4% a year, like all the other developed economies.

Also since everyone buys resources, what's relevant is world GDP growth, which is running at around 5% a year.

It's a bit simplistic to say that we push paper while they make things. It's characteristic of developing economies that they concentrate on primary and secondary industry; as they mature, their service sector will grow and they will push lots and lots of paper, too. And we still make lots and lots of stuff.
 
oh well just got stopped in USD @ 0810

there are no real (50+ pip) up move in the last week .. well that I could profit on anyway.

Waiting for lower levels to buy but too low for me to short

until next time looney
 
Why i don't like stops and try to find other ways to manage risk: stops are a great way to make sure you're always buying at the top and selling at the bottom.

Violating my own principles, I got nervous about my GBPCAD position (I was short at 2.1511) and put in a stop at 1530 before I went to bed. Naturally, it hit my stop and then plummeted to the 1460s this morning. So thanks to my stop, I was -19 instead of +50. The stop was at the top end of a 3-day 200-pip upward move that I was riding out, so overall my 150-pip first-day profit turned into a 50-pip loss.

It shouldn't be called a "stop loss", it should be called an "ensure loss". Much better to manage risk by spreading the bets around, hedging (having money on both sides of your base currency), and rebalancing from time to time. You set reasonable targets and wait for the fish to swim into the net. If one small position goes a few hundred pips offside, it doesn't matter much. If you have made sane entries and set attainable targets, 99% of your positions should pay off sooner or later, usually sooner. I am returning to that style of trading which has worked great for me, and forgetting about going for the big profits on the 1300-pip long-term moves.
 
oh man now I am pissed

I use to not use stops ... thus i lost a lot on the jpy carry unwind

You are right I need to manage my risk better ... but I think stop losses are still prudent

I guess I will have to change the way I target my stops

good luck good trading

its nice outside ... good day to hit some golf balls
 
I think this pair is in a downtrend. Brilliant.

cadexample.PNG
 
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