Forex Investment and Currency Trading

A forward contract binds two parties to exchange an agreed amount of one currency for another at a fixed rate on a specified future date. A forward rate is calculated by taking spot and adding or subtracting forward points. Spot is the price today to sell one currency and buy another with settlement in one business day. Forward points are determined by the currencies’ interest rate differentials. If the base (denominator) currency’s interest rates are higher, forward points will be negative and the forward rate will be priced at a discount. Conversely, if the base currency’s (denominator) interest rates are [...]

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USD/CAD Trapped in a Neutral 0.9724 – 1.0343 Trading Range
Active “Layered” hedging strategy - Sellers of USD/CAD should focus on resistance at 1.0235, 1.0343. A 3-month cable car option could also be incorporated into this strategy.
Disciplined “layered” hedging strategy - Buyers of USD/CAD should focus on support at 0.9895, 0.9724 and 0.9422. In addition, a 3-month enhanced forward could be considered for this strategy.

USD/CAD is trapped in a 0.9724 – 1.0343 trading range that has produced a neutral trend bias from a technical perspective.
A global economic slowdown is continue to be viewed as main concern for the Canadian dollar.
A marked slowdown in economic [...]

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There are increasing signs that the combination of the strong EUR, sharply higher energy prices, cumulative ECB tightening and weakening global growth are weighing heavily on Euro zone growth, with a risk of no ECB rate hike this year.
At the same time, expectations for US growth and interest rate hikes have adjusted sharply lower, suggesting limited further downside for the USD.
Accordingly, it is time to structure exposure for a gradual, but significant, decline in EUR/USD during the years ahead, and recommend establishing core short EUR/USD at 1.5920, targeting the January 22 low of 1.4365 with a two-day stop above 1.6250.
It appears [...]

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A Cross Currency Swap, or CCS, is an agreement between two parties to exchange both principal and interest cash flows denominated in different currencies. In its most common form, the Cross Currency Swap is based on floating rate flows in one (non-USD) currency against floating rate (i.e. LIBOR) payments in USD, but many other structures and currencies are possible. Usually, the principal amounts in each currency are exchanged at the start and end of the transaction.
Cross Currency Swap are typically used to take advantage of advantageous borrowing opportunities in different credit markets, particularly where a borrower faces differences in funding [...]

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The interrelationship between CAD, USD and oil is clearly evident through the impact of oil on trade balances. Presently, developments that are bullish for oil prices are bearish USD/CAD.
However, the rally in oil prices (44% YTD) and by extension overall energy prices obscured that Canadian and US non-energy trade balances are behaving as one would expect given lengthy periods of CAD strength and USD weakness. This will prove to be USD/CAD bullish in the medium-term.

Fed Chairman Bernanke’s comment this week about the upside risk to US inflation from USD weakness sparked a USD rally, and sharp sell offs in oil [...]

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