Forex Investment and Currency Trading

• USD/CAD traded in a relatively tight range overnight, avoiding the bulk of the most recent bout of intense retreat from risk.
• Canadian employment posts a shocking gain of 106.9K, which is cause for high-fives all around, but does not change the fact that the macroeconomic outlook remains an intensely challenging one for CAD.
• FX Bottom Line: USD/CAD remains dominated by a broad structural demand for USD, and a rapidly deteriorating global economic outlook. CAD avoided the worst of carry trade unwinding and the shedding of risk, but it cannot avoid the increased risk of a sharp global slowdown / contraction.

Overnight Spot Trading Activity: USD/CAD Rallies But Avoids Disposal of Risk

Asia: USD/CAD traded up through 1.16, highest since March 2007. Attention was elsewhere as risk aversion spiked late in NA and spilled over into Asia.

London: USD/CAD traded in a relatively tight 100pt range during the London session. This was consistent with most other currencies, as an uneasy calm settled over FX markets.

G7 Meeting — Time for Global Policymakers to Take Reins as Global Leaders US and Canadian trade data for August were released. No one really cares. Most of the focus will be on Washington and the extremely timely IMF annual meeting. This includes a meeting of the G7 Finance ministers tonight, and a broader gathering of the G20 on Saturday. With no hyperbole, the fate of the global financial system and the global economy is at stake. It is time for these global policymakers to swallow hard and step up as true global leaders. History beckons.

Short-Term Outlook: Upward Trend, But Extremely Overbought
USD/CAD remains broke ascending channel at 1.1389 with ease yesterday. The broken channel top now offers support at 1.1511. Resistance at 1.1694. Extreme overbought readings suggest some scope for a short-term pause in the raging rally in USD/CAD. However, there is unlikely to be any significant sell off short of a stunning change in sentiment.

Medium-Term Outlook: Shock and Awe
USD/CAD has moved quickly to almost fully unwind the sell off since March 2007. Key levels of resistance at 1.1789 and 1.1875. Valuations are extremely overbought, but market dynamics continue to lean against CAD.