Forex Investment and Currency Trading

Risk is “on” in a big way so far Monday, lifting the NZD to the top performance spot on the day so far while the JPY and the USD slump. Metals and crude oil prices are pushing higher in response to the pro-risk backdrop and the CAD is trying to shake off last week’s drop in form that saw it fall broadly. Cross flows are generally a little more constructive for the CAD this morning, with a couple of exceptions; one notable factor is the strong bid under AUD/CAD earlier in the session which drove the cross to a new high for the current cycle just under 1.00. USD/CAD found solid resistance in the mid/upper 1.07 area in early Asian dealing, however, and the slide in spot over the past few hours should put a firm short term lid on funds for the moment. CAD is looking somewhat oversold after trading more defensively though the latter part of last month; Friday’s employment report may not prove to be that much of a drag on the CAD moving forward given that the “fine print” provided some offsetting news to the weaker than expected headline jobs decline. Long CAD positioning has been substantially reduced (IMM data Friday showed net long speculative exposure had fallen by around half to just under 24k contracts) and that may provide the platform for a renewed pick up in the CAD as risk appetite improves. We have little on the data front today – Canadian housing starts are expected to pick up in October – so the markets will remain focused on equities and commodities for directional cues for the currencies.