Loonie ... the infamous USD/CAD

On rates: 8 years of double-deficit policies have painted the Fed into a corner. They can't raise rates, or it will do more damage to the housing market, which will spread and maybe cause a recession. They also can't lower rates, since inflation is still well over target. So they will stand pat for the time being. On the other hand, Canda is a surplus-surplus economy, housing is not in trouble and Dodge is very vigilant on inflation. Meaning the BofC is likely to raise rates this summer, to cool the economy.
I don't think rates have all that much to do with USDCAD, however. It took 13 straight rate increases to stop last year's plummet, and look: here we are again. Whether rates are at parity or one or two points above or below doesn;t matter I don;t think: there isn't enough of a difference to create a carry trade. It's all bout trade balances and equity capital flows, and it mainly comes down to oil prices. However, something new is happening: apparently positive trader reaction to economic data. Both economies are booming (except for US housing), but for an import-dependent economy, booming means more imports and thus more money leaving the country, whereas for a resource exporter like Canada, growth is usually a result of high resource prices and a competitively-priced currency. Which we had at 1.17 an don't any more.

I agree that it has to turn around, but who knows what the bottom is anymore. I'm guessing around 1.06, but I'm waiting for signs of cooling economies and a definite uptrend before I commit.

BTW, KGBtrader, what in your opinion is a "high probability trade" in USDCAD right now?
 
Canada has a problem as a resource country.

Whenever resource prices shooting way up, CAD gets stronger. In turns the non-resource related exporters all got hit big time.

Thus internal damage is already done during the rise of CAD. The issue is that the high resource prices will mask the damage for a long time until economic downturn or the resource prices dropping. e.g. Most of the Cdn high tech jobs are gone for good. Most of the R&D jobs are gone for good too.

When that happens, there is already nothing left in Canada's economy to sustain its growth.

But, that being said, it is all up to the resource prices for now :)
 
Quote from gspaulsson:

KGBtrader, what in your opinion is a "high probability trade" in USDCAD right now?
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There isn't one currently, so it pays to be patient (or short if you're previously short). I haven't seen a buy signal in 3 months. I'm looking for a rising 13-day ema combined with a rising macd histogram (last seen 2/26, indicated by the green candles on the attached chart). You'll notice from the chart, the lack of that combined signal is what kept me from buying into that bull trap back on 5/8 at 1.1100.

I will add this, the USDX appears to have found a short term bottom at 81 and is forming a new trend off the lows (today it closed about its 50-day sma for the first time since early Feb). Trading in the direction of the USDX increases the probability of a successful USDCAD long play significantly (should it begin to reverse). I don't like to call bottoms, but having tested 1.08 for 3 days without breaking it is at least some relief. Will continue to watch this one closely.
 

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Since you guys want to discuss longer term direction, here is something to chew on.....

A value and price distribution analysis of CAD using the October 1976 curve shows that it is top heavy and attempting to balance at lower levels. It shows a move to .9600. The intermediate term distribution within this curve shows a move up to 1760, then 2240. This is the real selling level. The real test where a rejection of value at this level will send prices south to balance the top heavy bull curve.

SweetLettuce
 
Quote from gspaulsson:

Zonetrooper, you're quite right, stops make you vulnerable to stop hunters. The technique is simple: say I have a billion Euros. I dump them on the market, pushing the price down and triggering stops, which pushes the price down further. Then I gradually buy my Euros back in blocks of 10 mil or so, riding the aftershocks. Only available to the big boys, of course.
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That's what I've felt often times when I've programmed a stop. So unless I set my stops I will loose. But even then, sometimes currency really an spike which can even hit outrages stop levels.

I think it probally best to just draw a red line on the chart to indicate where you would like to get out, and then if it reaches that line make a decition, depending on what else is going on in other currencies. Also, using good money management, seems the best way to go.
 
Well I have to say ... b4 Memorial Day weekend there must be no one around to buy the USDCAD

That "RIVER" method is very accurate almost to the T ... is there a website or instruction manual?

Well I have to say I put on two trades to short the USDCAD (in the 0850s) after seeing the "RIVER" method chart last night ... however I did not believe the USDCAD could get enough strength to surpass my stops @ 0870

I think I need to re-evaluate my risk reward management for the usdcad at these levels and allow the same risk for the same reward. Basically I should have put my stops above 0890 as the "RIVER" method suggest and as hind sight suggests after some more detailed chart analysis.

I have also noticed if you just use a default MACd signal and a default RSI signal you can usually get a good trade if those signals coincide (i.e. piercing the 70% and 30% percentiles in the RSI with crests and troughs of MACd ranges) very interpretative and can only work it seems on short term charts such as 5 minute charts.

basically I jumped the gun on my shorts in the USDCAD by selling before the piercing of the default RSI range and fudging the MacD crest.

but who cares ... I lost.

Have a good memorial day weekend

USDCAD trading will resume next week!
 
Didn't I say? Cheap loonies, Alcoa can bids for Alcan. Cheap dollars, Alcan goes for Alcoa. It's a yo-yo. I look for USDCAN to go to maybe 1.06 on momentum. 1.04 if Dodge raises rates (which I don;t think he will). Then when the effects percolate through the economy and we start generating crappy figures, late June or early July, the bloom will be off the world's love affair with USDCAD and it will bounce back to 1.13 or higher. Replay of last summer. If the US economy goes into recession, look for $40 oil and USDCAD at $1.20 by the end of the year. File this away for future reference.

I've currently got some on a USJPY unwind, some shorting GBPCAD (basically a bet on GBPUSD dropping below 1.97 because of the political uncertainty in Britain, sweetened by continuing weakness in USDCAD) , some banking on USDCHF hitting bottom of its current channel at around 1.2260. So that's basically on the dollar against GBP, against it vs. JPY, CAD and CHF, roughy balanced amounts. EUR and AUD not clear - they could go either way, so I'm sitting on my hands for now.
 
hard to imagine them raising rates with the dollar on fire. They will probably wait to see what kind of fallout it has on exports.

bwtfdik
 
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