Forex Investment and Currency Trading

Overnight Spot Trading Activity: USD/CAD Down on Wave of Confidence
Asia: USD/CAD traded to its lows overnight on a broad USD sell off and the dissipation of fear as efforts by global policymakers to shore up the financial system helped spark outright euphoria on global stock markets.
London: USD/CAD temporarily rallied toward the overnight high, but was soon swamped by the return of confidence on the view that the end of the credit market crisis is in sight. CAD is underperforming other currencies as Canada has not announced a dramatic move to bolster the financial system, and right now, bold initiatives are [...]

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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 [...]

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FX Bottom-Line: CAD remains a currency linked to the global economic cycle. With the a global recession as the base case scenario, a key fundamental backdrop for Canada’s terms of trade and CAD is fast deteriorating. Canada’s much improved economic fundamentals might prevent an uncontrolled descent, but cannot prevent the inevitable, which is a weaker CAD.
The recent rally in USD/CAD has reflected a clear realization that the global economic outlook is rather rapidly deteriorating.  CAD, and Canada’s terms of trade (the ratio of export to import prices) are closely tied to the overall global economic cycle. In particular, the strength [...]

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Equity market selloff would continue to place downward pressure on the CAD and vice versa.

Global growth outlook posits some degree of linkage between CAD and equities.
Except for a brief period in 2004 and 2006-2007, the CAD has often tracked moves in the
S&P 500 Index.
Prominent late last year, when the market focus shifted away from the CAD/commodity link
and more toward the CAD/equity link.
Equities viewed as a close proxy for the global economic growth outlook.

Slowdown in global growth is serving as a headwind to further CAD gains.

USD/CAD tends to have an inverse relationship with the G7 OECD leading indicator.
Slowdown in global growth [...]

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Last night the Senate passed the bailout package and it will now go back to the House, which will likely vote on Friday.  Chances are increasing of it being passed as investors might have changed their mind after the harsh equity market sell off when it was first rejected.  That being said, it won’t be over until the last required vote gets counted, until then, we are all in suspense.
The big US dollar rally this morning was triggered by comments from ECB President Trichet.  Although the ECB left rates on hold at their meeting, they have changed their stance and [...]

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