Interesting, after that onslaught from USD the kiwi was the only one that held it's ground.

I have the resistance at 0.7182, maybe I have this wrong and it's 0.72?

Comments......

@RBP
"That's quite a post" indeed (as John said.) And what a load of - pardon me - crap. O.K., let's see now. So the Canadian economy is shrinking, collapsing, going to the dogs. (some of the words used here every once in a while) Finally the loonie is heading towards the well-deserved basement and everybody is cheering its demise.
Thirty or so years ago 1 USD bought - what? - 3 CHF? And now? A mere 1.05 CHF. I call that movement over a very long time more of an indication of a country's economic health than a 5% movement over a week.
What about using the "economic performance" argument to the USD/CHF pair? The CHF lost as much against the USD as the CAD in exactly the same time frame during the last 5-10 days. Oh the poor, poor Swiss economy, with record exports, unemployment under 3% since decades, and inflation only now rising to - good heavens - 3%. It's going to the dogs. (Though, the UBS bank might). Right. How can anyone with any sense of reality attribute the days-old movement of a country's currency vis-a-vis the USD to economic performance of that country? The U.S. economy is producing one of the most spectacular decline in almost every department and yet the USD is on the rise now for at least a week. A spectacular 5% against a whole slew of economies in far better shape than that of the U.S.
And the role of oil to explain the CAD? I submit if you depend on that analysis you will lose money.
A few months ago the USD was down to 0.91 CAD while oil was worth "only" about 90 USD (but going up, which we didn't yet know how high) Yet today economists are blabbering about the CAD going down because oil is "only" 120 USD (but perhaps going down some more. Or maybe up again? NOONE KNOWS)

These numbers are spectacularly out of line with the movement of currency pair values. The short term fluctuations of currency pair values can and are used by technical traders to make and lose huge fortunes.

Traders who keep extrapolating Fibonacci data to predict the future shouldn't pay so much attention to what the economists are blabbering about. As if THEY knew why currencies move the way they do.

Pfew. As if anybody really understood.

Regards

Good points.

So far, this is a modest rebound in the grand scheme of the dollar's previous 5-year decline against the usual trade basket.

Technicals do work better for the short-term while fundamentals are good for the long-term (as they pertain to forecasting yield forecasts) and the very short-term in the typical news reaction.

I also agree that the USDCAD/Oil correlation isn't a hard fast rule (though people seem to always think it is especially when the first come across it) - especially when there are other dominate concerns floating around the market - interest rates most importantly.

However, I do have a few points I disagree on. First, the oil correlation has held statistical water over the long-term and I'm sure that the sharp drop in the CRB commodities index over the past week is helping to recharge the Canadian dollar's drop. Also, comparing the Switzerland to the US isn't really putting us on the apples to apples scale (really you can't compare any two economies on an even plain). The US is far larger than Switzerland with a very different financial and economic structure. The same can be said about matching the US to Canada. I have found that the most accurate gauge for spot direction is the difference in interest rate expectations (as a guide for investment returns) measured by both the overall level and expected level of change to that rate over time.

What do you see USDCAD doing through the short term?

I was actually looking at NZDUSD support at 0.7230/50, so I actually cut an exploratory position for a possible rebound.

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USD/CAD is going up too high.

from what i see, all commodity currencies have been dropping quite bit against USD for a while. They have all dropped a good few cents, especially the AUD and also the NZD.

I think this cant continue forever and a rebound should come sooner or later. I was unfortunately a bit late on both of the falls of AUD and NZD.
for NZD i didnt expect the RBNZ to drop the rates this time round. I thought they would do it next time.

and for the AUD, I kept going in, make a bit of money, get out, then watch it go down further, then go in again, make a bit more, then get out. i did a few times. (I'm still a noob)

But i'm just wonder when is the rebound coming? what do you guys think? and what would cause the rebound? what is there to trouble the USD in the near future? the only thing i can think of, is if price of oil goes back up.

From my understanding, the nuclear negotiations with Iran have failed again and there might be more sanctions coming. this will probably lead to further escalation and possibilty further hostilities in the middle east, leading to a price hike in oil.

What are your views? = )

John, I have no problem with currency pairs over a long term (years/decades) being reasonably good indicators of the respective economies they relate to. But the Financial Post (FP)article (quoted by RBP) goes into a long list of very recent negative Canadian economic ails and then attributes these to the U.S. economy: "U.S. economy clips the loonie's wings". In Canada it's also a perennially popular theme to blame the U.S. for the movement of the loonie as follows: if the U.S. goes into recession the CAD should go down due to reduced demands for Canadian exports. At the same time many analysts expect the CAD to go down once the U.S. economy improves. I read this opinion everyday. If you add these two views you have to conclude that the CAD should go down regardless how the U.S. economy performs.
I brought up the USD/CHF pair as an example how absurd the FP argument is by pointing out that the Swiss economy is booming yet in synchron with the USD/CAD the USD/CHF also increased by about 5% in less than a week. We cannot use economic argument such as: "U.S. economy clips the Swissy". Swiss trade with the U.S. is marginal compared to Canada's trade with the U.S. and the same can be said with respect to the EUR/USD which also underwent a small decline from 1.60 to 1.54. But what did it used to be some years ago? Near 1.1. Now that's a significant economic indicator and again it is the long term.

And yes, you are absolutely right to disagree when it comes to correlating CAD to oil prices. I guess I should have said that again I was talking short term. I wanted to emphasize that short term, even huge oil price changes (30-50% as recently) do not predict which way the USD/CAD will go and I used that extreme example of 90 USD oil versus USD/CAD = 0.91. Compare that again with near 150 USD oil but USD/CAD = 1.02 (about) some weeks ago.

If the FP meant that the dire U.S. economy is finally "clipping" the "high-flying" loonie then there is truth to that. Especially in view of the almost histerical cries by Canadian politicians and union leaders that the CAD should go down. It's also a fact that the "high" loonie is more than a thorn in the eye of many in the U.S. I suspect the reasons are not merely financial.

So, to answer your last question as to what I expect will happen to the USD/CAD. It will go down short term and 1.10 1.15 is likely in the short term After all that's what everybody wishes. And self-fullfilling prophesies are not unknown in the currency markets (just look at the success of some Fibonacci afficionados) But again, I'm talking strictly short-term.


Regards to all

mmmm, I'm really concerned here now.. considering I export items from the United states, its been a good haul, but recently watching the CDN dollar drop like a fly...


Does anyone here predict the possibility of it going back to 1.01.-2 in the near time? I know everyone is speculating 1.7 - 1.10 ... If so, for how long?? will we ever be parity again??


Thanks in advance.

erik

Looks like we're in the same general boat.

I personally think most of the convoluted technical analysis (RSI, MACD, moving average crossovers, dare I say even elliott wave) is self-fulfilling prophecy fodder. It works regardless.

You'll find that a lot of new analysts out there (and mostly journalists who form their articles around the opinions of others) will say one cause has one effect one day and then a 180 effect the next. Generally happens when they don't know what is causing the move.

Hello popzcamelx,

Why try to fight such a strong trend? I say this to many people, trend reversals happen 5-10% of the time. The rest of the time the market is trending or range bound. Best not to fight the flow - unless you are looking for a pull back to get into the larger trend...

The dollar has a lot of problems already. The FOMC hasn't confirmed when its next hike will be and the 75bps of tightening in overnight interest rates swaps is looking too aggressive. Employment is contracting and the overall consumer sector (accounting for 70% of growth) is slowing even while economists are saying the US has avoided a recession because of the 2Q GDP rebound. You have the ongoing credit issues and even banks have made a joint proposal that would cut deep into their business.

Oil is a lesser issue. It is actually more responsive to the dollar than the other way around because it is denominated in greenbacks.

It would probably be wise to put in some longer term hedging positions (depending on the notional size of exports you do).

Consider the US dollar on a trade weighted basis has just bounced off a recent record low. That gives a good feeling for how precarious the dollar's decline has become.

At these levels, it isn't worth speculating with your business by attempting to squeeze out a few more pennies with the risk that the exchange rate could be C$0.15 or C$0.20 higher by 12 months time.

Keep going up.

A few technical indicators supporting further upside movement are #1 Weekly ASI (accumulated strength index) currently showing a target above 1.2500 before reaching the "0" line again. #2 MVA (moving volume average) on the Daily which hit it's lowest Daily average on August 5th & 6th revealing support at the closing price of those days (should this Market retrace it's current gains). #3 a 26/9 week kinko hyo cross, which initially posted the week ending June 20th (it took five weeks of distribution after that for this Market to finally break). What we must watch for now is whether or not this Market will level out at the 1.0480 Price area next week before further gains or whether this feeding frenzy will propel it up to the 1.1500 area on a continued Low volume short covering bounce. The question I keep asking myself is, "is any smart money buying this Market up"? and where will it sit after January 24th 2009? The first legitimate retracement after this spike will reveal more.

From the analysis in the posted chart, the bullish breakout of this consolidation triangle on the weekly chart should target the identified horizontal resistance zone. The triangle mesures about 14.5 cents at its base. You can transpose the size of this triangle on the breakout zone and that will give you a target right below the last down move wave that started around 1.17.

If we ever make it there, this is a good time to start shorting again. Until then, we're in rebound mode but I expect that it's not going to be a smooth ride up.

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In my book, so long as we stay afloat of 1.0165 and never close below this, we're in rebound mode. But yeah, I am anxious to see what kind of follow up there will be when the sellers enter the market in mass...

As I said above, some pretty bumby time ahead.