Forex Investment and Currency Trading

So, after the dust has settled from this week’s focus on BoC policy, we are left with an overnight rate that the central bank has pre-committed to keep at 0.25% until the middle of next year (providing inflation behaves) and a framework for additional policy measures should they be needed. The read between the lines though is that the central bank perhaps doesn’t think these additional credit and quantitative easing (CE/QE) initiatives will be needed, if its latest growth estimates are on the money. The CAD was under a fair amount of pressure running into this week’s BoC policy announcement [...]

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Throughout October USD/CAD was essentially a one-way bet with the pair trading higher all the way from 1.05 levels to 1.30. Two key themes pushed the USD/CAD inexorably higher: rising global risk aversion (and as a consequence, a flight to quality and a bid for the USD) and a continued plunge in commodity prices. Equities have acted as a good proxy for the global risk sentiment theme with the S&P 500 index down 17% in October. Meanwhile, concerns over a
slowing global economy - and likely recession - in 2009 continues to have a material impact on the commodity price outlook. [...]

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CAD continues to drive lower, testing support at 0.9820/25 (May 21st low), after the surprising Current Account Balance release this morning.  Canada continues to befuddle our economists and traders but trend is definitely clear.  The next target level below 0.9820 will be 0.9715, the February 28th low. 
The interesting thing to note is that most of the country’s key economic figures, outside of labor, have all disappointed (building permits, motor sales, manufacturing shipments, retail sales).  It seems like businesses continue to hire despite the fact they are not building or exporting anything besides oil…to add insult to injury, those employed are [...]

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A lot happened over the last two weeks but the net result is USD/CAD is merely 0.8% lower over the period as the clearing of CAD shorts during the first week left was followed by a move higher in USD broadly this week. The stability of USD/CAD within the recent volatile ranges, however, masks CAD broad outperformance: over the past two weeks CAD was the strongest G10 currency, rallying as much as 4% versus funding FX and upwards of 2% versus all the european currencies, including a 2.8% to fellow commodity-currency NOK.
CAD strength is in large part attributable to a [...]

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