Forex Investment and Currency Trading

Risk sentiment is more positive this morning and the CAD is taking advantage of the better mood to push broadly higher, producing the second best performance among the major currencies in the overnight markets behind the NZD. Equity markets are positive in Asia and Europe and US futures indicate a strong opening this morning; investors appear a little less concerned by the UAE/Dubai World issues this morning, with Dubai World stating that it was in “constructive” talks with investors on restructuring that covered less than half its total debt. The impression is perhaps growing that the situation is a “little local difficulty” and not something that risks contaminating the global credit markets. Commodity prices have firmed and gold prices hit a new high in the overnight session, boosted by reports that China plans a sharp increase in reserve holdings (local media reportedly suggested that China plans to lift its gold holdings from just over 1000 tons currently to 10,000 tons over the next 8-10 years, though no confirmation of this). Yesterday, investors failed to react to positive US data that should have been beneficial to risk appetite but with the general mood improving this morning, better US ISM data today helped underpin risk appetite. Canadian GDP disappointed somewhat in terms of the headline release but did show some encouraging details which should help underpin CAD sentiment. Traders continue to look for USD/CAD to trade lower in the near term; technically, the market has run into a bunch of support points in the upper 1.04 zone but the near term target remains 1.0418, the early November lows.