The Canadian Dollar Hits A Fresh Milestone
Dr. Duru | Jan 06, 2016 05:32
August 27, 2003. This was the last trading day where USD/CAD traded above the 1.40 mark. Until now. The Canadian dollar (N:FXC) slipped hard and fast in overnight trading to hit 1.408 for USD/CAD at the time of writing.
Above the 1.40 level, there remains little resistance to the historic high of 1.6 on USD/CAD.
A dovish Bank of Canada opened the gate leading to this latest wave of weakness for the Canadian dollar (FXC)
The on-going weakness in oil has directly driven the Canadian dollar to this weakness. The Bank of Canada has helped greased the wheels by emphasizing its dovishness on monetary policy combined with two rate cuts in 2015. The first one was a huge surprise. Interestingly, speculators are just now clamoring to rebuild net short positions against the Canadian dollar despite the clear trend. Net short positions and open interest are not quite back to prior peaks when the Canadian dollar was stronger.
Speculators have spent most of the last three years in net bearish positions against the Canadian dollar, so it is surprising to see that multi-year weakness has not (yet?) led to new highs on short positions.
As I have indicated in past posts, I established a very small position in CurrencyShares Canadian Dollar ETF (N:FXC) in anticipation of an eventual return of strength for the Canadian dollar. This return looks further and further away with every fresh wave upward for USD/CAD. In the meantime, I have gone to the forex markets with periodic long positions on USD/CAD (buying dips). With USD/CAD trading through 1.40, I will add to the long-term FXC position and kick my USD/CAD trades up another notch until USD/CAD drops below 1.40 again. As an added twist, at the time of writing, I made a small bet that USD/CAD will retest the 1.40 level in the immediate term; this is also a very small hedge against on has become a very large overall bullish bet on the U.S. dollar. I think this is my first attempted short on USD/CAD in about a year…
Get The App
Be careful out there!
Full disclosure: long FXC, short USD/CAD (very short-term – I past the current trade, I remain bullish on USD/CAD), net long the U.S. dollar
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.