02-10-2010: March Canadian Dollar: Government Fiscal Management Sounder than U.S.
The Canadian Government's sounder fiscal policy might at first make it seem like the Canadian Dollar would be a better investment. But one of the key things affecting currency market values, realizing the Canadian Dollar contract is denominated in U.S. Dollars, is interest rate. The Bank of Canada has kept interest rates low in Canada, following the lead of the U.S., and this makes investing in its currency less attractive.
Commodity prices also affect Canadians as their economy is commodity-based, in energies, metal mining, lumber, and grains. Commodity prices have shown overall weakness lately, not helping the C$.
March Canadian Dollar:
March Canadian Dollar:
Macro economic sentiment gives the Canadian Dollar some slight recent support. Canada's economy is slowly improving, although it was badly affected by the financial crisis in the U.S. For all of 2008, real GDP was up 0.5% after gaining 2.7% in 2007. The Bank of Canada predicts that real GDP will e up 2.9% in 2010 and 3.5% in 2011. For recent fiscal years, the Canadian Government has shown a budget surplus, very unlike the U.S. Last October, the World Economic Forum said that Canada had the soundest banking system in the world. Canadian banks have the second highest ratio of bank deposits to liabilities in the world with the exception of Japan which is higher. The Canadian unemployment rate was 8.3% in January. The consumer price index as up +1.0% in November versus a year ago. Lat April, the Bank of Canada dropped the overnight lending rate from 0.50% to 0.25%. Public debt to GDP is 62%. Canada has a population of around 33.5 million. While briefly in recent times the Canadian Dollar became worth more than the U.S. Dollar, it is currently around 93.59 U.S. cents in the cash market. Advances in the North American equity sector and gold and crude oil prices have helped strengthen the Canadian Dollar. A bailout package for Greece has helped strengthen Canadian and other world bonds. The Bank of Canada will repurchase up to C$ 1 billion in Government of Canada marketable bonds. Weakness in grains and lumber prices is not helping the Canadian Dollar. But all in all, because of sounder governmental fiscal management, we gage the news as positive.
102.0I T 2/ 9
I IMM - Mar-10 Canadian Dollar, $100000, c/$ Cm.=0.03 Lim.= 1.5
I
I
I
99.5I_________________________________________________________________________
I
I
I
I X
97.0I________________________XO____X__________________________________________
I XO X
I XO X
I XOX X XO
I XOXOXOXO
94.5I______________________X_XOXOXOXO_________________________________________
I X XOXO OXO
I X X XO O O
I X X X X O
I X X XOXOX
92.0I________________XOX_XOXO_________________________________________________
I XOXOXOX
I XOXO O
I XOX
I XOX
89.5I________________XOX______________________________________________________
I XOX
I XOX
I XOX
I XOX
87.0I__X___________X_XOX______________________________________________________
I X XOXO
I X XOX
I X XO
I XO X
84.5IX_XO__X_______X__________________________________________________________
I OXO X X
I OXO X X
I OXO XOX X X
I OXO XOX XOX
82.0I_OXO__XOX_X_XOX__________________________________________________________
I OXOX XOX X XOX
I OXOX OXOX XOX
I OXOX OXOX XO
I OXOX OXOXO
79.5I_OXOX__O_OX______________________________________________________________
I OXOXO OX
I O O OX
I O
I
77.0I_________________________________________________________________________
I
I
I
I
74.5I_________________________________________________________________________
I
I
I
I
72.0I----I----I----I----I----I----I----I----I----I----I----I----I----I----I---
1111111 111111
00011221123344455678889990112221
22202011201302212011230232020022
01964412328090450341118400971880
The above point-and-figure chart is giving a conventional sell signal.
We are headed toward a cyclical high and a seasonal up period.
Our best-performing internal program is "WilderRT." It is giving a sell signal.
Results of "WilderRT" for Canadian Dollar (blue lines = successful trades, red, unsuccessful): (Not always in the market.)
Our third system is working on a long-term sell signal. (Note, disregard the year date on the chart. Our regular readers know this is not a Y2K-compliant system, but it still works.)
The point value is $1,000. Initial margin on a single contract is $3,375. Use of options is advised.
Scale trade sellers are entering the market in this price range for the long term.
In the chart below, the yellow line is the futures price, read on the right axis. All other colors are read on the left axis. Red is small speculators. Green is large speculators. Blue is commercials. Large speculators with the best track record are remaining very long.
The average volatility shown below suggests that a major change in direction to up is imminent at a volatility low point.
Our option trade recommendation is to Sell the Canadian Dollar June 92 Call @ 3.44 or better.
What the Mar. - Jun. calendar spread suggests to us is that buying the near contract and selling the far one is at most times not profitable, which we think is a sign that these futures may go down. The best time to enter or leave the above spread is when it is at $0 or narrower selling the near as prices are falling and then buying the far, and exiting or entering when it is at -$200 or wider buying the near as prices are rising and then sellling the far.
Here's an intraday chart for the previous day ( 2/05 ).
Risk Versus Opportunity Report
________________________________
CDH0 March Canadian Dollar
High Price: 95.16
Current Price: 93.55
Low Price: 90.31
Risk: -0.035
Opportunity: -0.070
(O/R) Ratio = 2.012
Level Table:
| Factors | Weighted Points |
|---|---|
| Parabolic Chart | - 1 |
| Nirvana Chart | - 1 |
| News | + 1 |
| Point & Figure | - 1 |
| Cyclicals | + 1 |
| Seasonals | + 1 |
| Internal System 1 | - 1 |
| Internal System 2 | 0 |
| Third System | - 1 |
| Commitment of Traders | + 1 |
| Historic Range | - 1 |
| Range/Volatility | - 1 |
| Level Table | - 1 |
| Other Factors | - 1 |
| Total | - 5 |
Place 8 March Canadian Dollar on a Sell Watch with stoploss @+0.0137 above the get-in point.________________________________________________________________________________________________________C.T.
